During the first quarter, guru Alan Fournier (Trades, Portfolio) added 279,226 shares of Signet Jewelers Ltd. (SIG, Financial) at an average price of $113.79.
Signet Jewelers Limited is the largest specialty jewelry retailer in the U.S., U.K. and Canada. Signet operates approximately 3,600 stores primarily under the name brands of Kay Jewelers, Zales, Jared The Galleria Of Jewelry, H.Samuel, Ernest Jones, Peoples and Piercing Pagoda. The company’s annual sales of approximately $6 billion derive from the retailing of jewelry, watches and associated services.
Signet Jewelers has a market cap of $6.95 billion, a P/E ratio of 14.22, an enterprise value of $8.26 billion, a P/B ratio of 2.25 and a dividend yield of 1.03.
Fournier may have decided to add to his largest stake in his current portfolio for the following reasons:
- The company has been able to improve its revenue per share by an average of 9% annually over the previous 10 years.
- The company has reported significant improvements in revenue growth (7.10%), EBITDA growth of 21.10%, operating income (24%), free cash flow (567.10%) and book value (9.70%) over the trailing 12 months.
- The company has a Altman Z-Score of 4.09, which indicates that the company is in the safe zone and is not in danger of filing for bankruptcy within the next two years. Z-Score is a financial model created by NYU business professor Edward Altman. It is used to predict a company’s likelihood of declaring bankruptcy.
Below is a Peter Lynch chart for Signet Jewelers Limited.
In conclusion
The company has reported excellent short term improvements within multiple areas of its financial results over the trailing 12 months. The company also scored a Beneish M-Score of -2.39, indicating that Signet Jewelers is not a manipulator of its financial statements. Signet Jewelers is currently trading at $89.13. The company has dropped 22% since Fournier added 279,226 shares of the company during the first quarter.
Fournier graduated with a degree in mechanical engineering in 1983 from the Wentworth Institute of Technology in Boston. After working for several years in the engineering field, Fournier decided to change directions in life. In 1988, Fournier began his investment career working at Sanford C. Bernstein. He then worked in global equity investments at Appaloosa Management, where he met David Tepper (Trades, Portfolio). In 2001, Fournier formed his own hedge fund, Pennant Capital Management. The firm currently owns 37 stocks with a total estimated value of $3.5 billion.
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