Shares of Fossil Group, Inc. (NASDAQ: FOSL) are receiving a lot of investor interest as of late due to the stock’s 125.8% increase over the prior three months. Shareholders are now asking themselves whether the company’s current stock price is reflective of its true value or if shares have even further upside from here.
Let’s take a look at Fossil’s value and outlook based on its most recent financial data to see if there are any catalysts for a price change.
What’s The Opportunity In Fossil?
Fossil appears to be overvalued by -33.1% at the moment, based on 5 separate valuation models. The stock is currently trading at $28.41 on the market compared to our average intrinsic value of $19.01. This means that the buying opportunity has probably disappeared for now.
|Analysis||Model Fair Value||Upside (Downside)|
|10-yr DCF Revenue Exit||$38.08||34.0%|
|10-yr DCF EBITDA Exit||$16.33||-42.5%|
|5-yr DCF EBITDA Exit||$17.47||-38.5%|
|10-yr DCF Growth Exit||$11.98||-57.8%|
|5-yr DCF Growth Exit||$11.21||-60.5%|
Click on any of the analyses above to view the latest model with real-time data.
Furthermore, Fossil’s share price also seems relatively stable compared to the rest of the market as indicated by its low beta of -0.70. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon. And once it’s there, it may be hard to fall back down into an attractive buying range.
Can We Expect Growth From Fossil?
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
Fossil’s revenue growth is expected to average -1.6% over the next five fiscal years indicating that the core business could be in real trouble. In fact, this could imply that its products or services are losing demand and/or becoming irrelevant.
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 Fossil?
Unfortunately for shareholders, Fossil’s future growth is relatively low and it appears the stock is now trading above its intrinsic value. Therefore, it may be a good time to begin reducing your position in the company. However, there are also other factors to consider that could explain the current overvaluation.
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 Fossil by taking a look at the following:
Valuation Metrics: what is Fossil’s EBITDA less CapEx multiple and how does it compare to its peers? This is a helpful multiple to analyze when comparing capital intensive businesses. View the company’s EBITDA less CapEx multiple here.
Risk Metrics: what is Fossil’s asset efficiency? This ratio measures the amount of cash flow that a company generates from its assets. View the company’s asset efficiency here.
Efficiency Metrics: is management becoming more or less efficient in creating value for the firm? Find out by analyzing the company’s return on invested capital ratio 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.