Personal Products Stocks

Inter Parfums Inc Valuation – Initial Coverage $IPAR

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 – December 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 Inter Parfums Inc (IPAR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Inter Parfums, Inc. operates in the fragrance business. The Company manufactures, markets and distributes fragrances and fragrance-related products. It operates in two segments: European based operations and United States based operations. Under its European Operations, the Company produces and distributes fragrance products primarily under license agreements with brand owners and its prestige brands include Balmain, Boucheron, Coach, Jimmy Choo, Karl Lagerfeld, Lanvin, Montblanc, Paul Smith, S.T. Dupont, Repetto, Rochas and Van Cleef & Arpels. Prestige brand fragrance products are also marketed under its United States operations. These fragrance products are sold under trademarks owned by the Company or pursuant to license or other agreements with the owners of brands, which include Abercrombie & Fitch, Agent Provocateur, Anna Sui, Banana Republic, bebe, Dunhill, Hollister, French Connection, Oscar de la Renta, and Shanghai Tang brands.

IPAR Chart

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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. 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.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of IPAR – December 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 $1,054,498,566 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.65 Pass
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 31.28% Fail
6. Moderate PEmg Ratio PEmg < 20 27.18 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.74 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 3.65 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.18 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 Fail

Stage 2: Determination of Intrinsic Value

EPSmg $1.25
MG Growth Estimate -4.25%
MG Value $5.34
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $18.19
MG Value based on 0% Growth $10.66
Market Implied Growth Rate 9.34%
Current Price $34.10
% of Intrinsic Value 638.91%

Inter Parfums, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the lack of earnings growth over the last five years. 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 Overvalued after seeing its EPSmg (normalized earnings) decline from $2.02 in 2012 to an estimated $1.25 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 9.34% annual earnings growth 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 Inter Parfums, Inc. revealed the company was trading above its Graham Number of $17.18. The company pays a dividend of $0.58 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 27.18, which was above the industry average of 26.36. Finally, the company was trading above its Net Current Asset Value (NCAV) of $5.34.

Inter Parfums, 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) $5.34
Graham Number $17.18
PEmg 27.18
Current Ratio 3.65
PB Ratio 2.74
Current Dividend $0.58
Dividend Yield 1.70%
Number of Consecutive Years of Dividend Growth 2

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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $483,551,000
Total Current Liabilities $132,460,000
Long-Term Debt $61,858,000
Total Assets $705,599,000
Intangible Assets $202,308,000
Total Liabilities $317,184,000
Shares Outstanding (Diluted Average) 31,171,000

Earnings Per Share History

Next Fiscal Year Estimate $1.05
Dec2015 $0.98
Dec2014 $0.95
Dec2013 $1.27
Dec2012 $4.26
Dec2011 $1.05
Dec2010 $0.87
Dec2009 $0.74
Dec2008 $0.77
Dec2007 $0.76
Dec2006 $0.57
Dec2005 $0.50
Dec2004 $0.51
Dec2003 $0.46
Dec2002 $0.31
Dec2001 $0.27
Dec2000 $0.23
Dec1999 $0.18
Dec1998 $0.15
Dec1997 $0.14
Dec1996 $0.17

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.25
Dec2015 $1.47
Dec2014 $1.71
Dec2013 $1.93
Dec2012 $2.02
Dec2011 $0.88
Dec2010 $0.78
Dec2009 $0.71
Dec2008 $0.67
Dec2007 $0.61
Dec2006 $0.51
Dec2005 $0.46
Dec2004 $0.41
Dec2003 $0.33
Dec2002 $0.26
Dec2001 $0.22
Dec2000 $0.18

Recommended Reading:

Other ModernGraham posts about the company

None.  This is the first time ModernGraham has covered the company.

Other ModernGraham posts about related companies

Avon Products Inc Valuation – July 2016 $AVP
Proctor & Gamble Co Valuation – July 2016 $PG
International Flavors & Fragrances Inc Valuation – June 2016 $IFF
Kimberly-Clark Corporation Valuation – June 2016 $KMB
Estee Lauder Companies Inc Valuation – May 2016 $EL
Colgate-Palmolive Co Valuation – January 2016 Update $CL
International Flavors & Fragrances Valuation – December 2015 Update $IFF
The Estee Lauder Company Valuation – October 2015 Update $EL
International Flavors & Fragrances Inc. Analysis – August 2015 Update $IFF
Estee Lauder Companies Analysis – August 2015 Update $EL

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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