Apparel Stocks

VF Corp Valuation – August 2016 $VFC

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – July 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how VF Corp (VFC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): V.F. Corporation (VF) is engaged in the design, manufacturing, marketing and distribution of branded lifestyle apparel, footwear and related products. The Company’s segments include Outdoor & Action Sports, Jeanswear, Imagewear, Sportswear, Contemporary Brands and Other. The Company owns a portfolio of brands in the outerwear, footwear, denim, backpack, luggage, accessory, sportswear, occupational and performance apparel categories. The Company’s brands primarily include The North Face, Vans, Timberland, Wrangler, Lee Nautica, Majestic and Kipling. The Company’s products are marketed to consumers shopping in specialty stores, upscale and traditional department stores, national chains, mass merchants and its own direct-to-consumer operations. Its direct-to-consumer business includes VF-operated stores, concession retail stores and e-commerce sites. The Company’s brands sell products in international markets through licensees, distributors and independently-operated partnership stores.

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VFC Chart

VFC data by YCharts

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of VFC – August 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $26,347,048,836 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.53 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 119.88% Pass
6. Moderate PEmg Ratio PEmg < 20 22.91 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.66 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.53 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

VFC value chart August 2016

EPSmg $2.72
MG Growth Estimate 7.31%
MG Value $62.96
Opinion Fairly Valued
MG Grade B+
MG Value based on 3% Growth $39.48
MG Value based on 0% Growth $23.14
Market Implied Growth Rate 7.20%
Current Price $62.37
% of Intrinsic Value 99.06%

VF Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.83 in 2012 to an estimated $2.72 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 7.2% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

VF Corp performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

VFC charts August 2016

Net Current Asset Value (NCAV) -$2.27
Graham Number $26.92
PEmg 22.91
Current Ratio 1.53
PB Ratio 5.66
Current Dividend $1.43
Dividend Yield 2.29%
Number of Consecutive Years of Dividend Growth 20

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Useful Links:

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Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2016
Total Current Assets $4,068,016,000
Total Current Liabilities $2,660,633,000
Long-Term Debt $1,400,636,000
Total Assets $9,674,108,000
Intangible Assets $3,763,467,000
Total Liabilities $5,025,671,000
Shares Outstanding (Diluted Average) 422,059,000

Earnings Per Share History

Next Fiscal Year Estimate $2.89
Dec2015 $2.85
Dec2014 $2.38
Dec2013 $2.71
Dec2012 $2.43
Dec2011 $2.00
Dec2010 $1.30
Dec2009 $1.03
Dec2008 $1.36
Dec2007 $1.31
Dec2006 $1.18
Dec2005 $1.11
Dec2004 $1.05
Dec2003 $0.90
Dec2002 -$0.35
Dec2001 $0.30
Dec2000 $0.55
Dec1999 $0.75
Dec1998 $0.78
Dec1997 $0.68
Dec1996 $0.57

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.72
Dec2015 $2.58
Dec2014 $2.36
Dec2013 $2.19
Dec2012 $1.83
Dec2011 $1.49
Dec2010 $1.23
Dec2009 $1.20
Dec2008 $1.25
Dec2007 $1.17
Dec2006 $1.00
Dec2005 $0.81
Dec2004 $0.60
Dec2003 $0.39
Dec2002 $0.23
Dec2001 $0.54
Dec2000 $0.67

Recommended Reading:

Other ModernGraham posts about the company

Dividend Growth Stocks for Intelligent Investors – June 2016
Dividend Growth Stocks for Intelligent Investors – February 2016
26 Best Stocks For Value Investors This Week – 2/6/16
VF Corporation Valuation – February 2016 Update $VFC

Other ModernGraham posts about related companies

L Brands Inc Valuation – July 2016 $LB
Michael Kors Holdings Ltd Valuation – July 2016 $KORS
Under Armour Inc Valuation – June 2016 $UA
Nike Inc. Valuation – May 2016 $NKE
Wolverine World Wide Inc Valuation – May 2016 $WWW
Ralph Lauren Corp Stock Valuation – February 2016 $RL
Gap Inc Valuation – February 2016 $GPS
American Eagle Outfitters Valuation – February 2016 $AEO
Hanesbrands Inc Valuation – February 2016 Update $HBI
VF Corporation Valuation – February 2016 Update $VFC

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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