Over the past twelve months, shares of Fossil Group (FOSL) have lagged the S&P 500 by roughly 35%. This has nearly erased the company’s five-year period of incredible market outperformance.
Valuation
While revenues continue to climb, it’s P/S ratio has fallen to near historical trough levels.
While dramatically lower than past growth rates, Wall Street still estimates that FOSL should grow EPS by >10% over the next five years.
Plugging these low expected growth rates into GuruFocus’ Reverse DCF Tool estimates that the shares are currently ~23% undervalued.
Another indication that the shares are oversold is the company’s discounted P/E valuation in comparison to retail peers. Gap (GPS) is expected to grow at a similar 10.3% over the next five years while Guess (GES) is expected to grow a paltry 2.2%.
Still, FOSL trades at a discount to both of these competitors despite frequently warranting a premium over the past ten years.
Compared to other larger brands such as Nike (NKE) and Adidas (ADDYY), FOSL looks similarly cheap.
Ownership
Legendary Guru investor Joel Greenblatt (Trades, Portfolio) has 0.53% of his entire portfolio invested in the shares, recently bumping up the position by ~3x.
There is also a significant amount of insider ownership (>20%), rising over the past twelve months from 17%. Key directors such as the Chairman and CEO have ~10% stakes each, incentivizing them well to correct a lagging share price and think long-term.
Conclusion
At the end of the day, investors are getting a global retail brand portfolio with a well-incentivized management team that has shown a long history of creating shareholder value…all at an attractive valuation on almost every metric. This looks like a quality find for GuruFocus’ Undervalued Predictable Companies Screener. For more, check out the rest of R. Vanzo’s Articles.
