Ralph Lauren: Attractively Priced As Margins Expand

  • Ralph Lauren is an outlier luxury stock, with a double-digit price rise YTD, even as the sector struggles.
  • Revenues continue to grow, even if slowly, particularly in the challenged China market. Margins are forecast to expand as well.
  • While the stock's forward P/E is elevated compared with peers, it's still rather attractive compared to its own past average.

winhorse

If there's any outlier luxury stock out there right now, it has to be Ralph Lauren (NYSE:RL). The S&P Global Luxury Index (SPGLGUN) is down by ~4% year-to-date (YTD), but in sharp contrast, RL is up by 40%.

Signslast wrote

Price Returns (Seeking Alpha)

Still deeply undervalued, in some respects

  • In line with the company's projections, reported revenues are assumed to grow by 1%.
  • Similarly, the adjusted operating margin assumption is 13.6%, which is the midpoint of the company's guidance range.
  • In line with 2023 figures, the ratio of adjusted net profit to adjusted operating profit is expected to be 83%.
  • It's significantly lower than the stock's five-year average of 30.8x. This is despite robust double-digit earnings growth in Q1 FY25 and FY24 of 15% YoY and 23.6% respectively.
  • It's also a shade lower than the median P/E of 17.06x for the consumer discretionary sector.

Financials, Comparison with Peers (Seeking Alpha)

Revenue growth seen in Q2 FY25 and FY25

  • RL forecasts revenues at constant currency (CC) to grow by 2-3%, which is a small decline at the midpoint from the 3% growth seen in FY24.
  • So far, though, it's performing relatively well. In Q1 FY25, revenue growth was at 3% YoY, which is the top end of the guidance range. And they are expected to grow by 3-4% in Q2 FY25, which is 0.5 percentage points higher than the 3% increase seen in Q1 FY25 and also above the full-year guidance range.

#1. Growth despite unfavorable exchange rate impacts

#2. Europe and Asia hold up revenues

Ralph Lauren

Margin expansion to continue

What next?

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Report

Comment

  • Top
  • Latest
empty
No comments yet