Tiffany & Co (NYSE: TIF) investors have enjoyed seeing the stock price increase by 31.8% over the prior three months. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at the company’s expected growth and valuation based on its most recent financial data to see if there is further upside moving forward.
What’s The Opportunity In Tiffany?
Tiffany appears to be overvalued by -21.2% at the moment, based on 12 separate valuation models. The stock is currently trading at $133.62 on the market compared to our average intrinsic value of $105.33. This means that the buying opportunity has probably disappeared for now.
|Analysis||Model Fair Value||Upside (Downside)|
|10-yr DCF Revenue Exit||$92.55||-30.7%|
|5-yr DCF Revenue Exit||$86.18||-35.5%|
|Peer Revenue Multiples||$71.79||-46.3%|
|10-yr DCF EBITDA Exit||$117.58||-12.0%|
|5-yr DCF EBITDA Exit||$118.25||-11.5%|
|Peer EBITDA Multiples||$90.48||-32.3%|
|10-yr DCF Growth Exit||$143.19||7.2%|
|5-yr DCF Growth Exit||$151.07||13.1%|
|Peer P/E Multiples||$83.35||-37.6%|
|Dividend Discount Model||$81.43||-39.1%|
|Dividend Discount Model (multi-stage)||$134.15||0.4%|
|Earnings Power Value||$93.90||-29.7%|
Click on any of the analyses above to view the latest model with real-time data.
However, will there be another opportunity to buy low in the future? Given that Tiffany’s stock is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) could mean the price can sink lower, giving investors another chance to buy in the future. This is based on its beta of 1.59, which is a good indicator for share price volatility.
Can We Expect Growth From Tiffany?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matters the most, a more compelling investment thesis would be high growth potential at a cheap price.
source: finbox.io data explorer
With net income expected to grow at an average rate of 21.8% over the next couple years, the future certainly appears bright for Tiffany. It looks like higher cash flows are in the cards for shareholders, which should feed into a higher stock valuation.
What This Means For Investors
Growth investors typically look to invest in companies that are expanding sales, gaining market share and building customer bases. On the other hand, value investors often argue that the most successful investments are in companies that deliver the highest cash flows while trading at the lowest valuation.
But why not put those hands together? A company that has both growth and value characteristics would certainly make the most attractive investment. So what did we find out about Tiffany?
Tiffany has positioned itself so that double-digit growth appears to be a reasonable assumption for the foreseeable future. However, this growth does not look highly attractive at current trading levels. As such, investors may want to hold off on buying or adding to their TIF position for the time being.
It is important to note that there are a variety of other fundamental factors that I have not taken into consideration in this article. If you have not done so already, I highly recommend that you complete your research on Tiffany by taking a look at the following:
Valuation Metrics: what is Tiffany & Co’s price to book ratio and how does it compare to its peers? Analyze Price / Book here.
Risk Metrics: what is Tiffany & Co’s CapEx coverage? This is the amount a company outlays for capital assets for each dollar it generates from those investments. View the company’s CapEx coverage here.
Efficiency Metrics: inventory turnover is a ratio that measures the number of times a company’s inventory is sold and replaced over the year. View Tiffany & Co’s inventory turnover here.
As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.