Capri Holdings Inc Valuation – April 2019 #CPRI

Company Profile (excerpt from Reuters): Capri Holdings Limited, formerly Michael Kors Holdings Limited, incorporated on December 13, 2002, is a designer, marketer, distributor and retailer of branded women’s apparel and accessories and men’s apparel bearing the Michael Kors tradename and related trademarks MICHAEL KORS, MICHAEL MICHAEL KORS, and various other related trademarks and logos. The Company operates through three segments: retail, wholesale and licensing. The Retail operations consist of collection stores and lifestyle stores, including concessions and outlet stores, located primarily in the Americas (the United States, Canada and Latin America), Europe and Asia, as well as e-commerce. Wholesale revenues are principally derived from major department and specialty stores located throughout the Americas, Europe and Asia. The Company licenses its trademarks on products, such as fragrances, beauty, eyewear, leather goods, jewelry, watches, coats, men’s suits, swimwear, furs and ties, as well as through geographic licenses.

Downloadable PDF version of this valuation:

ModernGraham Valuation of CPRI – April 2019

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 $7,413,375,503 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.48 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 737.59% Pass
6. Moderate PEmg Ratio PEmg < 20 12.62 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.26 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 2.48 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.95 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

EPSmg $3.90
MG Growth Estimate 5.84%
MG Value $78.64
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $56.51
MG Value based on 0% Growth $33.13
Market Implied Growth Rate 2.06%
Current Price $49.19
% of Intrinsic Value 62.55%

Capri Holdings Ltd qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the poor dividend history. The Enterprising Investor is only concerned with the lack of dividends. As a result, all value 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 $2.81 in 2015 to an estimated $3.9 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.06% 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 above the price.

At the time of valuation, further research into Capri Holdings Ltd revealed the company was trading above its Graham Number of $34.96. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 12.62, which was below the industry average of 46.49, 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 $-2.14.

Capri Holdings Ltd performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$2.14
Graham Number $34.96
PEmg 12.62
Current Ratio 2.48
PB Ratio 3.26
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $3,439,500,000
Total Current Liabilities $1,387,400,000
Long-Term Debt $1,954,700,000
Total Assets $6,028,400,000
Intangible Assets $1,912,900,000
Total Liabilities $3,761,300,000
Shares Outstanding (Diluted Average) 150,268,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.03
Mar2018 $3.82
Mar2017 $3.29
Mar2016 $4.44
Mar2015 $4.28
Mar2014 $3.22
Mar2013 $1.97
Mar2012 $0.78
Mar2011 $0.33
Mar2010 $0.22

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.90
Mar2018 $3.82
Mar2017 $3.70
Mar2016 $3.58
Mar2015 $2.81
Mar2014 $1.81
Mar2013 $0.96
Mar2012 $0.39
Mar2011 $0.17
Mar2010 $0.07

Recommended Reading:

Other ModernGraham posts about the company

Michael Kors Holdings Ltd Valuation – March 2018 $KORS
10 Undervalued Stocks for the Enterprising Investor – August 2017
10 Low PE Stock Picks for the Enterprising Investor – July 2017
5 Undervalued Companies for Value Investors with a Low Beta – July 2017
10 Undervalued Stocks for the Enterprising Investor – July 2017

Other ModernGraham posts about related companies

Ralph Lauren Corp Valuation – March 2019 #RL
Gap Inc Valuation – March 2019 #GPS
PVH Corp Valuation – February 2019 $PVH
VF Corp Valuation – February 2019 $VFC
Foot Locker Inc Valuation – January 2019 $FL
Under Armour Inc Valuation – January 2019 $UA
Hanesbrands Inc Valuation – January 2019 $HBI
L Brands Inc Valuation – January 2019 $LB
Nike Inc Valuation – November 2018 $NKE
Deckers Outdoor Corp Valuation – May 2018 $DECK


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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