Fossil Group Inc Valuation – June 2018 $FOSL

Company Profile (excerpt from Reuters): Fossil Group, Inc., incorporated on December 26, 1991, is a design, marketing and distribution company that specializes in consumer fashion accessories. The Company’s segments include Americas, Europe and Asia. Each segment includes sales to wholesale and distributor customers, and sales through the Company-owned retail stores and e-commerce activities based on the location of the selling entity. The Americas segment includes sales to customers based in Canada, Latin America and the United States. The Europe segment includes sales to customers based in European countries, the Middle East and Africa. The Asia segment includes sales to customers based in Australia, China, India, Indonesia, Japan, Malaysia, New Zealand, Singapore, South Korea, Taiwan and Thailand. The Company’s principal offerings include a line of men’s and women’s fashion watches and jewelry, handbags, small leather goods, belts, sunglasses and soft accessories. The Company’s products are distributed through various distribution channels, including wholesale in countries where it has a physical presence, direct to the consumer (D2C) through its retail stores and commercial Websites and through third-party distributors in countries where it do not maintain a physical presence.

FOSL Chart

FOSL data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of FOSL – June 2018

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 $1,398,383,974 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.21 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -196.46% Fail
6. Moderate PEmg Ratio PEmg < 20 -15.40 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.63 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 2.21 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.53 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg -$1.84
MG Growth Estimate -4.25%
MG Value $3.43
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$26.75
MG Value based on 0% Growth -$15.68
Market Implied Growth Rate -11.95%
Current Price $28.40
% of Intrinsic Value 826.87%

Fossil Group Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the lack of earnings stability or growth over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $6.1 in 2014 to an estimated $-1.84 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Fossil Group Inc revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was -15.4, which was below the industry average of 37.1, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $3.43.

Fossil Group Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $3.43
Graham Number $0.00
PEmg -15.40
Current Ratio 2.21
PB Ratio 2.63
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $1,156,424,000
Total Current Liabilities $523,897,000
Long-Term Debt $335,536,000
Total Assets $1,515,671,000
Intangible Assets $83,880,000
Total Liabilities $989,116,000
Shares Outstanding (Diluted Average) 48,712,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$1.84
Dec2017 -$9.87
Dec2016 $1.63
Dec2015 $4.51
Dec2014 $7.10
Dec2013 $6.56
Dec2012 $5.59
Dec2011 $4.61
Dec2010 $3.77
Dec2009 $2.07
Dec2008 $2.02
Dec2007 $1.75
Dec2006 $1.13
Dec2005 $1.04
Dec2004 $1.23
Dec2003 $0.92
Dec2002 $0.81
Dec2001 $0.62
Dec2000 $0.76
Dec1999 $0.69
Dec1998 $0.44

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$1.84
Dec2017 -$0.57
Dec2016 $4.41
Dec2015 $5.76
Dec2014 $6.10
Dec2013 $5.24
Dec2012 $4.26
Dec2011 $3.34
Dec2010 $2.52
Dec2009 $1.80
Dec2008 $1.59
Dec2007 $1.32
Dec2006 $1.08
Dec2005 $1.01
Dec2004 $0.95
Dec2003 $0.79
Dec2002 $0.71

Recommended Reading:

Other ModernGraham posts about the company

Fossil Group Inc Valuation – March 2017 $FOSL
10 Stocks for Using A Benjamin Graham Value Investing Strategy – March 2017
10 Low PE Stock Picks for the Enterprising Investor – March 2017
5 Companies for Enterprising Investors Near 52 Week Lows – March 2017
Best Stocks Below Their Graham Number – February 2017

Other ModernGraham posts about related companies

JC Penney Company Valuation – June 2018 $JCP
Shoe Carnival Inc Valuation – June 2018 $SCVL
Aaron’s Inc Valuation – June 2018 $AAN
GameStop Corp Valuation – June 2018 $GME
Urban Outfitters Inc Valuation – June 2018 $URBN
Ulta Beauty Inc Valuation – June 2018 $ULTA
Kohl’s Corporation Valuation – June 2018 $KSS
Dollar Tree Inc Valuation – May 2018 $DLTR
TJX Companies Inc Valuation – May 2018 $TJX
Tractor Supply Co Valuation – April 2018 $TSCO

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.

Fossil Group Inc Valuation – March 2017 $FOSL

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 Stocks for Using A Benjamin Graham Value Investing Strategy – March 2017.  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 Fossil Group Inc (FOSL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Fossil Group, Inc. is a design, marketing and distribution company that specializes in consumer fashion accessories. The Company’s segments are Americas, Europe and Asia. Each segment includes sales to wholesale and distributor customers, and sales through the Company-owned retail stores and e-commerce activities based on the location of the selling entity. The Americas segment includes sales to customers based in Canada, Latin America and the United States. The Europe segment includes sales to customers based in European countries, the Middle East and Africa. The Asia segment includes sales to customers based in Australia, China, India, Indonesia, Japan, Malaysia, New Zealand, Singapore, South Korea, Taiwan and Thailand. The Company’s principal offerings include a line of men’s and women’s fashion watches and jewelry, handbags, small leather goods, belts, sunglasses and soft accessories. Its brand includes FOSSIL, MICHELE, RELIC, SKAGEN, ZODIAC, ADIDAS, BURBERRY, DIESEL and DKNY.

FOSL Chart

FOSL data by YCharts

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ModernGraham Valuation of FOSL – March 2017

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 $805,898,203 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.25 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -12.21% Fail
6. Moderate PEmg Ratio PEmg < 20 5.51 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.79 Pass
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 3.25 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.65 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

EPSmg $2.97
MG Growth Estimate -4.25%
MG Value $3.45
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $43.12
MG Value based on 0% Growth $25.28
Market Implied Growth Rate -1.50%
Current Price $16.38
% of Intrinsic Value 475.03%

Fossil Group Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings growth over the last ten years, and the poor dividend history. The Enterprising Investor has concerns regarding the lack of earnings growth over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $5.24 in 2013 to an estimated $2.97 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 1.5% annual earnings loss over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Fossil Group Inc revealed the company was trading below its Graham Number of $18.91. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 5.51, which was below the industry average of 50.09, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $3.45.

Fossil Group Inc receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $3.45
Graham Number $18.91
PEmg 5.51
Current Ratio 3.25
PB Ratio 0.79
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Total Current Assets $1,347,290,000
Total Current Liabilities $414,585,000
Long-Term Debt $609,961,000
Total Assets $2,186,897,000
Intangible Assets $502,387,000
Total Liabilities $1,180,661,000
Shares Outstanding (Diluted Average) 48,323,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.76
Dec2016 $1.63
Dec2015 $4.51
Dec2014 $7.10
Dec2013 $6.56
Dec2012 $5.59
Dec2011 $4.61
Dec2010 $3.77
Dec2009 $2.07
Dec2008 $2.02
Dec2007 $1.75
Dec2006 $1.13
Dec2005 $1.04
Dec2004 $1.23
Dec2003 $0.92
Dec2002 $0.81
Dec2001 $0.62
Dec2000 $0.76
Dec1999 $0.69
Dec1998 $0.44
Dec1997 $0.18

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.97
Dec2016 $4.41
Dec2015 $5.76
Dec2014 $6.10
Dec2013 $5.24
Dec2012 $4.26
Dec2011 $3.34
Dec2010 $2.52
Dec2009 $1.80
Dec2008 $1.59
Dec2007 $1.32
Dec2006 $1.08
Dec2005 $1.01
Dec2004 $0.95
Dec2003 $0.79
Dec2002 $0.71
Dec2001 $0.62

Recommended Reading:

Other ModernGraham posts about the company

10 Undervalued Stocks for the Enterprising Investor – August 2016
10 Low PE Stock Picks for the Enterprising Investor – August 2016
5 Undervalued Stocks for Value Investors with a High Beta – August 2016
10 Most Undervalued Companies for the Enterprising Investor – July 2016
10 Low PE Stocks for the Enterprising Investor – July 2016

Other ModernGraham posts about related companies

Lumber Liquidators Holdings Inc Valuation – Initial Coverage $LL
CVS Health Corp Valuation – March 2017 $CVS
Target Corp Valuation – March 2017 $TGT
Foot Locker Inc Valuation – Initial Coverage $FL
Ulta Beauty Inc Valuation – Initial Coverage $ULTA
Kohl’s Corporation Valuation – March 2017 $KSS
Stamps.com Inc Valuation – Initial Coverage $STMP
Kirkland’s Inc Valuation – Initial Coverage $KIRK
Dollar Tree Inc Valuation – February 2017 $DLTR
Staples Inc Valuation – February 2017 $SPLS

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.

Fossil Group Inc Valuation – August 2016 $FOSL

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 Stocks for Using A Benjamin Graham Value Investing Strategy – August 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 Fossil Group Inc (FOSL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Fossil Group, Inc. is a design, marketing and distribution company that specializes in consumer fashion accessories. The Company’s segments are Americas, Europe and Asia. Each segment includes sales to wholesale and distributor customers, and sales through the Company-owned retail stores and e-commerce activities based on the location of the selling entity. The Americas segment includes sales to customers based in Canada, Latin America and the United States. The Europe segment includes sales to customers based in European countries, the Middle East and Africa. The Asia segment includes sales to customers based in Australia, China, India, Indonesia, Japan, Malaysia, New Zealand, Singapore, South Korea, Taiwan and Thailand. The Company’s principal offerings include a line of men’s and women’s fashion watches and jewelry, handbags, small leather goods, belts, sunglasses and soft accessories. Its brand includes FOSSIL, MICHELE, RELIC, SKAGEN, ZODIAC, ADIDAS, BURBERRY, DIESEL and DKNY.

FOSL Chart

FOSL data by YCharts

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To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

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. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of FOSL – 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 $1,368,350,287 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.19 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 123.97% Pass
6. Moderate PEmg Ratio PEmg < 20 6.88 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.53 Pass
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 3.19 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.79 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

FOSL value chart August 2016

EPSmg $4.36
MG Growth Estimate 0.36%
MG Value $40.21
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $63.22
MG Value based on 0% Growth $37.06
Market Implied Growth Rate -0.81%
Current Price $29.98
% of Intrinsic Value 74.55%

Fossil Group Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, poor dividend history. The Enterprising Investor is only concerned with the lack of dividends. 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 Undervalued after growing its EPSmg (normalized earnings) from $4.26 in 2012 to an estimated $4.36 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.81% annual earnings loss over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Fossil Group Inc revealed the company was trading above its Graham Number of $25.49. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 6.88, which was below the industry average of 49.91, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $0.64.

Fossil Group Inc performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

FOSL charts August 2016

Net Current Asset Value (NCAV) $0.64
Graham Number $25.49
PEmg 6.88
Current Ratio 3.19
PB Ratio 1.53
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2016
Total Current Assets $1,312,360,000
Total Current Liabilities $411,701,000
Long-Term Debt $708,664,000
Total Assets $2,226,538,000
Intangible Assets $518,841,000
Total Liabilities $1,281,289,000
Shares Outstanding (Diluted Average) 48,207,000

Earnings Per Share History

Next Fiscal Year Estimate $1.47
Dec2015 $4.51
Dec2014 $7.10
Dec2013 $6.56
Dec2012 $5.59
Dec2011 $4.61
Dec2010 $3.77
Dec2009 $2.07
Dec2008 $2.02
Dec2007 $1.75
Dec2006 $1.13
Dec2005 $1.04
Dec2004 $1.23
Dec2003 $0.92
Dec2002 $0.81
Dec2001 $0.62
Dec2000 $0.76
Dec1999 $0.69
Dec1998 $0.44
Dec1997 $0.18
Dec1996 $0.20

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $4.36
Dec2015 $5.76
Dec2014 $6.10
Dec2013 $5.24
Dec2012 $4.26
Dec2011 $3.34
Dec2010 $2.52
Dec2009 $1.80
Dec2008 $1.59
Dec2007 $1.32
Dec2006 $1.08
Dec2005 $1.01
Dec2004 $0.95
Dec2003 $0.79
Dec2002 $0.71
Dec2001 $0.62
Dec2000 $0.56

Recommended Reading:

Other ModernGraham posts about the company

10 Most Undervalued Companies for the Defensive Investor – February 2016
10 Most Undervalued Companies for the Defensive Investor – September 2015
10 Low PE Stocks for the Defensive Investor – August 2015
The Best Companies of the Retail Industry – August 2015
10 Most Undervalued Companies for the Defensive Investor – August 2015

Other ModernGraham posts about related companies

TJX Companies Inc Valuation – August 2016 $TJX
Dollar General Corp Valuation – August 2016 $DG
Coach Inc Valuation – August 2016 $COH
Tiffany & Co Valuation – August 2016 $TIF
Best Buy Co Valuation – July 2016 $BBY
GameStop Corp Valuation – July 2016 $GME
Urban Outfitters Inc Valuation – July 2016 $URBN
Macy’s Inc Valuation – July 2016 $M
Costco Wholesale Corp Valuation – July 2016 $COST
Amazon Inc Valuation – July 2016 $AMZN

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.

Fossil Group Inc Stock Valuation – February 2016 $FOSL

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 – February 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 Fossil Group Inc (FOSL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Fossil Group, Inc. is a global designer, marketer and distributor company that specializes in consumer fashion accessories. The Company’s offerings include a line of men’s and women’s fashion watches and jewelry, handbags, small leather goods, belts, sunglasses, soft accessories, and select apparel. The Company operates in four different segments: the North America Wholesale segment, the Europe Wholesale segment, Asia Pacific Wholesale segment and the Direct to Consumer segment. Its products are distributed globally through various distribution channels, including wholesale, retail stores and commercial Websites. The Company sells its products through a diversified distribution network that includes department stores, specialty retail locations, specialty watch and jewelry stores, Company-owned retail and factory outlet stores, mass market stores, and through its FOSSIL Website.

[level-free]

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

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.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of FOSL

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 $1,698,941,499 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.61 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 264.69% Pass
6. Moderate PEmg Ratio PEmg < 20 6.09 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.91 Pass
Score
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 3.61 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.69 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

FOSL value chart February 2016

EPSmg $5.66
MG Growth Estimate 10.41%
MG Value $165.99
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $82.09
MG Value based on 0% Growth $48.12
Market Implied Growth Rate -1.21%
Current Price $34.46
% of Intrinsic Value 20.76%

Fossil Group Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, and the poor dividend history. The Enterprising Investor is only concerned with the lack of dividends. 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 Undervalued after growing its EPSmg (normalized earnings) from $3.34 in 2011 to an estimated $5.66 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.21% annual earnings loss 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 above the price. Fossil Group Inc performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

FOSL charts February 2016

Net Current Asset Value (NCAV) $3.73
Graham Number $41.36
PEmg 6.09
Current Ratio 3.61
PB Ratio 1.91
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information Sep2015
Total Current Assets $1,565,034,000
Total Current Liabilities $433,532,000
Long-Term Debt $785,706,000
Total Assets $2,254,877,000
Intangible Assets $359,423,000
Total Liabilities $1,385,085,000
Shares Outstanding (Diluted Average) 48,242,000

Earnings Per Share History

Next Fiscal Year Estimate $4.21
Dec2014 $7.10
Dec2013 $6.56
Dec2012 $5.59
Dec2011 $4.61
Dec2010 $3.77
Dec2009 $2.07
Dec2008 $2.02
Dec2007 $1.75
Dec2006 $1.13
Dec2005 $1.04
Dec2004 $1.23
Dec2003 $0.92
Dec2002 $0.81
Dec2001 $0.62
Dec2000 $0.76
Dec1999 $0.69
Dec1998 $0.44
Dec1997 $0.18
Dec1996 $0.20

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $5.66
Dec2014 $6.10
Dec2013 $5.24
Dec2012 $4.26
Dec2011 $3.34
Dec2010 $2.52
Dec2009 $1.80
Dec2008 $1.59
Dec2007 $1.32
Dec2006 $1.08
Dec2005 $1.01
Dec2004 $0.95
Dec2003 $0.79
Dec2002 $0.71
Dec2001 $0.62
Dec2000 $0.56
Dec1999 $0.41

Recommended Reading:

Other ModernGraham posts about the company

10 Most Undervalued Companies for the Defensive Investor – February 2016
10 Most Undervalued Companies for the Defensive Investor – September 2015
10 Low PE Stocks for the Defensive Investor – August 2015
The Best Companies of the Retail Industry – August 2015
10 Most Undervalued Companies for the Defensive Investor – August 2015

Other ModernGraham posts about related companies

TJX Companies Inc Valuation – February 2016 Update $TJX
Coach Inc Valuation – February 2016 Update $COH
Tiffany & Company Valuation – February 2016 Update $TIF
Urban Outfitters Inc Valuation – January 2016 Update $URBN
CVS Health Corp Valuation – December 2015 Update $CVS
Ross Stores Inc Valuation – December 2015 Update $ROST
Bed Bath & Beyond Inc. Valuation – November 2015 Update $BBBY
Kohl’s Corporation Valuation – November 2015 Update $KSS
Aaron’s Inc. Valuation – October 2015 Update $AAN
Nordstrom Inc. Valuation – October 2015 Update $JWN

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.

Fossil Group Inc. Analysis – September 2015 Update $FOSL

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 Most Undervalued Companies for the Defensive Investor – August 2015.  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 Fossil Group Inc. (FOSL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Fossil Group, Inc. is a global designer, marketer and distributor company that specializes in consumer fashion accessories. The Company’s offerings include a line of men’s and women’s fashion watches and jewelry, handbags, small leather goods, belts, sunglasses, soft accessories, and select apparel. The Company operates in four different segments: the North America Wholesale segment, the Europe Wholesale segment, Asia Pacific Wholesale segment and the Direct to Consumer segment. Its products are distributed globally through various distribution channels, including wholesale, retail stores and commercial Websites. The Company sells its products through a diversified distribution network that includes department stores, specialty retail locations, specialty watch and jewelry stores, Company-owned retail and factory outlet stores, mass market stores, and through its FOSSIL Website.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of FOSL – September 2015

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 $2,802,588,480 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.58 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 276.94% Pass
6. Moderate PEmg Ratio PEmg < 20 9.91 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.40 Pass
Score
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 3.58 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.69 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

FOSL value Chart September 2015

EPSmg $5.86
MG Growth Estimate 11.31%
MG Value $182.38
Opinion Undervalued
MG Value based on 3% Growth $84.99
MG Value based on 0% Growth $49.82
Market Implied Growth Rate 0.71%
Current Price $58.09
% of Intrinsic Value 31.85%

Fossil Group Inc. qualifies for both the Defensive Investor and for the Enterprising Investor.  Both investor types are only concerned by the lack of dividend.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $3.34 in 2011 to an estimated $5.86 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.71% annual earnings loss 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 above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Fossil Group Inc. (FOSL)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

FOSL Charts September 2015

Net Current Asset Value (NCAV) $2.87
Graham Number $43.21
PEmg 9.91
Current Ratio 3.58
PB Ratio 3.40
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

 

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Most Recent Balance Sheet Figures

Total Current Assets $1,366,339,000
Total Current Liabilities $381,910,000
Long-Term Debt $674,445,000
Total Assets $2,059,441,000
Intangible Assets $363,942,000
Total Liabilities $1,226,495,000
Shares Outstanding (Diluted Average) 48,744,000

Earnings Per Share History

Next Fiscal Year Estimate $4.81
Dec14 $7.10
Dec13 $6.56
Dec12 $5.59
Dec11 $4.61
Dec10 $3.77
Dec09 $2.07
Dec08 $2.02
Dec07 $1.75
Dec06 $1.13
Dec05 $1.07
Dec04 $1.22
Dec03 $0.93
Dec02 $0.81
Dec01 $0.62
Dec00 $0.76
Dec99 $0.69
Dec98 $0.44
Dec97 $0.18
Dec96 $0.20
Dec95 $0.12

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $5.86
Dec14 $6.10
Dec13 $5.24
Dec12 $4.26
Dec11 $3.34
Dec10 $2.52
Dec09 $1.80
Dec08 $1.59
Dec07 $1.32
Dec06 $1.08
Dec05 $1.02
Dec04 $0.95
Dec03 $0.80
Dec02 $0.71
Dec01 $0.62
Dec00 $0.56
Dec99 $0.42

Recommended Reading:

Other ModernGraham posts about the company

10 Most Undervalued Companies for the Defensive Investor – September 2015
10 Low PE Stocks for the Defensive Investor – August 2015
The Best Companies of the Retail Industry – August 2015
10 Most Undervalued Companies for the Defensive Investor – August 2015
10 Companies Benjamin Graham Would Invest In Today – August 2015

Other ModernGraham posts about related companies

Ross Stores Inc. Analysis – August 2015 Update $ROST
The Best Companies of the Retail Industry – August 2015
Bed Bath & Beyond Inc. Analysis – August 2015 Update $BBBY
Ann Inc. Analysis – Initial Coverage $ANN
Kohl’s Corporation Analysis – August 2015 Update $KSS
Aaron’s Inc. Analysis – Initial Coverage $AAN
Nordstrom Inc. Analysis – July 2015 Update $JWN
Tractor Supply Company Analysis – Initial Coverage $TSCO
Coach Inc. Analysis – July 2015 Update $COH
TJX Companies Analysis – July 2015 Update $TJX

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.

5 Undervalued Companies for the Defensive Investor Near 52 Week Lows – August 2015 $BEN $RL $FOSL $PWR $CMI

5def-und-lows_edited-1

There are a number of great companies in the market today. By using the ModernGraham Valuation Model, I’ve selected the five undervalued companies reviewed by ModernGraham trading closest to their 52 week low. Each of these companies has been determined to be suitable for the Defensive Investor according to the ModernGraham approach. Defensive Investors are defined as investors who are not able or willing to do substantial research into individual investments, and therefore need to select only the companies that present the least amount of risk. Enterprising Investors, on the other hand, are able to do substantial research and can select companies that present a moderate (though still low) amount of risk.

Be sure to check out the history of this screen to see which companies have been selected in the past.

Here are the five undervalued companies for the Defensive Investor near 52 week lows:

Franklin Resources Inc. (BEN)

Franklin_Resources_LogoFranklin Resources performs very well in the ModernGraham model and is suitable for both Defensive and Enterprising Investors. In fact, the company passes all of the requirements of both investor types, which is a rare accomplishment indicative of the company’s strong financial position. As a result, all value investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $2.23 in 2011 to an estimated $3.49 for 2015. This is a strong level of demonstrated growth, which is well above the market’s implied estimate of 3.03% annual earnings growth over the next 7-10 years.

Here, actual growth in EPSmg over the last several years has averaged over 11% annually, so the market is expecting a very significant drop in earnings growth. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, but still estimates a growth figure much higher than the market’s implied rate. Therefore, the model returns an estimate of intrinsic value well above the current price, indicating the company is significantly undervalued at the present time. (See the full valuation)

Ralph Lauren Corporation (RL)

Ralph_Lauren_Corporation

Ralph Lauren performs well in the ModernGraham model and is suitable for both Defensive and Enterprising Investors. The Defensive Investor is only concerned with the poor PB ratio, while the Enterprising Investor has no initial concerns. As a result, all Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $4.76 in 2011 to an estimated $7.81 for 2015. This is a strong level of growth and is well above the market’s implied estimate of only 4.33% annual earnings growth over the next 7-10 years.

Here, actual growth in EPSmg over the last several years has averaged nearly 9.6% annually, so the market is expecting a very significant drop in earnings growth. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, but still estimates a growth figure much higher than the market’s implied rate. Therefore, the model returns an estimate of intrinsic value well above the current price, indicating the company is significantly undervalued at the present time. (See the full valuation)

Fossil Group Inc. (FOSL)

220px-Fossil_logo.svgFossil Group performs well in the ModernGraham model and is suitable for both Defensive and Enterprising Investors. Both investor types are only initially concerned by the lack of dividend payments. As a result, all value investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $1.68 in 2011 to an estimated $6.01 for 2015. This is a strong level of growth and is well above the market’s implied estimate of only 1.68% annual earnings growth over the next 7-10 years.

Here, actual growth in EPSmg over the last several years has averaged nearly 16% annually, so the market is expecting a very significant drop in earnings growth. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, but still estimates a growth figure much higher than the market’s implied rate. Therefore, the model returns an estimate of intrinsic value well above the current price, indicating the company is significantly undervalued at the present time.  (See the full valuation)

Quanta Services Inc. (PWR)

220px-QScolorjpgQuanta Services passes the initial requirements of both the Defensive Investor and the Enterprising Investor. Both investor types are only initially concerned by the lack of dividends. As a result, all value investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, it has grown its EPSmg (normalized earnings) from $0.74 in 2011 to an estimated $1.57 for 2015. This is a fairly strong level of demonstrated growth and outpaces the market’s implied estimate for annual earnings growth of only 4.64% over the next 7-10 years.

In recent years, the company’s actual growth in EPSmg has averaged around 22.7% annually, and while the ModernGraham valuation model reduces the actual growth to a more conservative figure when making an estimate, the model still returns an estimate of intrinsic value well above the current price, indicating that Quanta Services is significantly undervalued at the present time.  (See the full valuation)

Cummins Inc. (CMI)

Logo_cumminsCummins performs well in the ModernGraham model and is suitable for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the high PB ratio while the Enterprising Investor has no initial concerns. As a result, all value investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $5.78 in 2011 to an estimated $8.88 for 2015. This is a strong level of demonstrated growth, which is well above the market’s implied estimate of 3.74% annual earnings growth over the next 7-10 years.

Here, actual growth in EPSmg over the last several years has averaged over 10.7% annually, so the market is expecting a very significant drop in earnings growth. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, but still estimates a growth figure much higher than the market’s implied rate. Therefore, the model returns an estimate of intrinsic value well above the current price, indicating the company is significantly undervalued at the present time.  (See the full valuation)

What do you think?  Are these companies a good value for Defensive Investors?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

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 those holdings within the next 72 hours.

Fossil Group Inc. Analysis – June 2015 Update $FOSL

220px-Fossil_logo.svgFossil Group Inc. (FOSL) has shown very strong earnings growth over the last several years, which should immediately intrigue many investors. In fact, analysts believe the company has strong potential for the future. For example, AH Research recently wrote that the company should benefit fromstrong diversification in its product line. On the other hand, Arsalan Mohiuddin takes a much more pessimistic view based on the CEO’s recent sale of some of his holdings. Those articles all provide great qualitative consideration that must be taken into account when making investment decisions.

However, Benjamin Graham, the father of value investing, taught that investors must take emotion out of the equation, as the most important aspect to consider is whether the company is trading at a discount relative to its intrinsic value. It is through a thorough fundamental analysis that the investor is able to make a determination about a potential investment’s merits. Here’s a look at how the company fares in the ModernGraham valuation model.

The model is inspired by the teachings of Benjamin Graham and considers numerous metrics intended to help the investor reduce risk levels. The first part of the analysis is to determine whether the company is suitable for the very conservative Defensive Investor or the less conservative Enterprising Investor, who is willing to spend a greater amount of time conducting further research.

In addition, Graham strongly suggested that investors avoid speculation to remove the subjective elements of emotion. This is best achieved by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another. By using the ModernGraham method, one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.

FOSL Chart

FOSL data by YCharts

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Defensive Investor – Must pass at least 6 of the following 7 tests: Score = 6/7

  1. Adequate Size of Enterprise – Market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – Current ratio greater than 2 – PASS
  3. Earnings Stability – Positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – Has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – Earnings per share has increased by at least 1/3rd over the last 10 years, using 3-year averages at the beginning and end of the period – PASS
  6. Moderate PEmg (price over normalized earnings) ratio – PEmg is less than 20 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – Must pass at least 4 of the following 5 tests or be suitable for a Defensive Investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – Current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt-to-Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – Positive earnings per share for at least 5 years – PASS
  4. Dividend Record – Currently pays a dividend – FAIL
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $71.28
MG Value $194.85
MG Opinion Undervalued
Value Based on 3% Growth $87.12
Value Based on 0% Growth $51.07
Market Implied Growth Rate 1.68%
Net Current Asset Value (NCAV) $3.41
PEmg 11.86
Current Ratio 3.50
PB Ratio 4.14

Balance Sheet – March 2015

Current Assets $1,345,000,000
Current Liabilities $384,000,000
Total Debt $626,000,000
Total Assets $2,043,000,000
Intangible Assets $366,000,000
Total Liabilities $1,173,000,000
Outstanding Shares 50,500,000

Earnings Per Share

2015 (estimate) $5.25
2014 $7.10
2013 $6.56
2012 $5.59
2011 $4.61
2010 $3.77
2009 $2.07
2008 $2.02
2007 $1.75
2006 $1.13
2005 $1.07

Earnings Per Share – ModernGraham

2015 (estimate) $6.01
2014 $6.10
2013 $5.24
2012 $4.26
2011 $3.34
2010 $2.52

Dividend History

Fossil Group does not pay a dividend.

Conclusion

Fossil Group performs well in the ModernGraham model and is suitable for both Defensive and Enterprising Investors. Both investor types are only initially concerned by the lack of dividend payments. As a result, all value investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $1.68 in 2011 to an estimated $6.01 for 2015. This is a strong level of growth and is well above the market’s implied estimate of only 1.68% annual earnings growth over the next 7-10 years.

Here, actual growth in EPSmg over the last several years has averaged nearly 16% annually, so the market is expecting a very significant drop in earnings growth. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, but still estimates a growth figure much higher than the market’s implied rate. Therefore, the model returns an estimate of intrinsic value well above the current price, indicating the company is significantly undervalued at the present time.

Value Investors should take this information regarding the company’s valuation and proceed with further research into whether the company would be suitable for individual portfolios, as it has passed a ModernGraham review.

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.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

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Fossil Group Inc. Quarterly Valuation – March 2015 $FOSL

220px-Fossil_logo.svgBenjamin 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 5 Most Undervalued Companies for the Defensive Investor – March 2015.  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 specific look at how Fossil Group Inc. (FOSL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Fossil Group, Inc., formerly Fossil, Inc., a global designer, marketer and distributer company that specializes in consumer fashion accessories. The Company’s offerings include a line of men’s and women’s fashion watches and jewelry, handbags, small leather goods, belts, sunglasses, soft accessories and clothing. Its products are distributed globally through various distribution channels, including wholesale in countries where it has a physical presence, direct to the consumer through its retail stores and commercial websites and through third-party distributors in countries where the Company do not maintain a physical presence. It operates in four different segments: the North America Wholesale segment, the Europe Wholesale segment, Asia Pacific Wholesale segment and the Direct to Consumer segment. On December 31, 2012, the Company purchased substantially all of the assets of Bentrani Watches, LLC (Bentrani).

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – FAIL
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $80.43
MG Value $234.85
MG Opinion Undervalued
Value Based on 3% Growth $88.45
Value Based on 0% Growth $51.85
Market Implied Growth Rate 2.34%
Net Current Asset Value (NCAV) $5.06
PEmg 13.19
Current Ratio 3.33
PB Ratio 4.23

Balance Sheet – December 2014

Current Assets $1,490,000,000
Current Liabilities $447,000,000
Total Debt $614,000,000
Total Assets $2,208,000,000
Intangible Assets $308,000,000
Total Liabilities $1,230,000,000
Outstanding Shares 51,400,000

Earnings Per Share

2014 $7.10
2013 $6.56
2012 $5.59
2011 $4.61
2010 $3.77
2009 $2.07
2008 $2.02
2007 $1.75
2006 $1.13
2005 $1.07
2004 $1.23

Earnings Per Share – ModernGraham

2014 $6.10
2013 $5.24
2012 $4.26
2011 $3.34
2010 $2.52
2009 $1.80

Dividend History
Fossil Group Inc. does not pay a dividend.

Conclusion:

Fossil Group Inc. is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the lack of dividend payments and the high PB ratio, while the Enterprising Investor is concerned by the lack of of dividends.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.52 in 2010 to $6.10 for 2014.  This level of demonstrated growth is greater than the market’s implied estimate of 2.34% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.

Be sure to check out previous ModernGraham valuations of Fossil Group Inc. (FOSL) for greater perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Fossil Group Inc. (FOSL)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Fossil Group Inc. (FOSL) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Fossil Group Inc. Quarterly Valuation – December 2014 $FOSL

220px-Fossil_logo.svg

Fossil Group performs quite well in the ModernGraham model, and is suitable for Enterprising Investors. The Defensive Investor is concerned with the lack of dividends and the high PB ratio, while the Enterprising Investor is only concerned by the lack of dividends. As a result, Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $2.52 in 2010 to an estimated $6.11 for 2014. This is a very strong level of demonstrated growth which is well above the market’s implied estimate 4.49% annual earnings growth over the next 7-10 years. Here, the historical growth in EPSmg over the last five years is around 28.5% per year, which is clearly unsustainable over a long period of time. As a result, the ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur. The ModernGraham estimate is capped at 15% annual growth, which is still significantly higher than the market estimate. A significant slowdown would have to occur to justify a price as low as the market is demonstrating. Therefore, the model returns an estimate of intrinsic value well above the current price, indicating the company is significantly undervalued at the present time.

Be sure to check out previous ModernGraham valuations of Fossil Group for a greater perspective!

Read the full valuation on Seeking Alpha!

FOSL Chart

FOSL data by YCharts

Disclaimer:  The author did not hold a position in Fossil Group Inc. (FOSL) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Fossil Group Inc. Quarterly Stock Valuation – September 2014 $FOSL

220px-Fossil_logo.svgBenjamin 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 5 Undervalued Companies for the Enterprising Investor.  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 specific look at how Fossil Group Inc. (FOSL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Fossil Group, Inc., formerly Fossil, Inc., a global designer, marketer and distributer company that specializes in consumer fashion accessories. The Company’s offerings include a line of men’s and women’s fashion watches and jewelry, handbags, small leather goods, belts, sunglasses, soft accessories and clothing. Its products are distributed globally through various distribution channels, including wholesale in countries where it has a physical presence, direct to the consumer through its retail stores and commercial websites and through third-party distributors in countries where the Company do not maintain a physical presence. It operates in four different segments: the North America Wholesale segment, the Europe Wholesale segment, Asia Pacific Wholesale segment and the Direct to Consumer segment. On December 31, 2012, the Company purchased substantially all of the assets of Bentrani Watches, LLC (Bentrani).
FOSL Chart

FOSL data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period -PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – FAIL
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $102.01
MG Value $232.41
MG Opinion Undervalued
Value Based on 3% Growth $87.53
Value Based on 0% Growth $51.31
Market Implied Growth Rate 4.20%
Net Current Asset Value (NCAV) $4.86
PEmg 16.90
Current Ratio 3.25
PB Ratio 5.38

Balance Sheet – 7/5/2014

Current Assets $1,410,000,000
Current Liabilities $433,700,000
Total Debt $533,200,000
Total Assets $2,160,600,000
Intangible Assets $320,400,000
Total Liabilities $1,151,400,000
Outstanding Shares 53,190,000

Earnings Per Share

2014 (estimate) $6.91
2013 $6.56
2012 $5.59
2011 $4.61
2010 $3.77
2009 $2.07
2008 $2.02
2007 $1.75
2006 $1.13
2005 $1.07
2004 $1.22

Earnings Per Share – ModernGraham

2014 (estimate) $6.04
2013 $5.24
2012 $4.26
2011 $3.34
2010 $2.52
2009 $1.80

Dividend History

Fossil Group does not pay a dividend.

Conclusion:

Fossil Group satisfies the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned with the lack of dividend payments and the high PB ratio.  The Enterprising Investor’s only initial concern is the lack of dividend payments.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with research into the company and comparing it to other opportunities.  From a valuation perspective, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.52 in 2010 to an estimated $6.04 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 4.20% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Fossil Group Inc. (FOSL)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Fossil Group Inc. (FOSL) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

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