As lovebirds around the world celebrate Valentine’s Day, investors may want to consider companies that profit from Cupid’s bow and arrows.
According to the National Retail Federation, the average U.S. consumer is expected to spend approximately $162 on Valentine’s presents for their significant others, children, teachers and classmates, coworkers, friends and even pets this year. Total spending is projected to reach $20.7 billion. Of that, the annual survey found those celebrating the holiday will spend $3.9 billion on jewelry, $3.5 billion on an evening out, $2.1 billion on clothing, $1.9 billion on flowers, $1.8 billion on candy, $1.3 billion on gift cards and $933 million on greeting cards.
As a result, value may be found in companies like 1-800-Flowers.com Inc. (FLWS, Financial), The Hershey Co. (HSY, Financial), Tiffany & Co. (TIF, Financial) and Card Factory PLC (LSE:CARD, Financial).
1-800-Flowers.com
The New York-based retailer of floral arrangements and gourmet foods has a $1.08 billion market cap; its shares were trading around $16.85 on Thursday with a price-earnings ratio of 33.15, a price-book ratio of 3.04 and a price-sales ratio of 0.93.
The Peter Lynch chart shows the stock is trading higher than its fair value, suggesting it is overpriced.
GuruFocus rated 1-800-Flowers’ financial strength 8 out of 10. In addition to having adequate interest coverage, the Altman Z-Score of 4.55 indicates the company is in good fiscal standing.
The company’s profitability and growth scored a 6 out of 10 rating, driven by operating margin expansion, good returns and a moderate Piotroski F-Score of 5, which suggests business conditions are stable. The company also has a business predictability rank of one out of five stars, which, according to GuruFocus, means it typically sees its stock gain an average of 1.1% per year. The rank is on watch, however, as its assets are building at a faster rate than its revenue is growing, which suggests it is becoming less efficient.
Of the gurus invested in 1-800-Flowers, Mario Gabelli (Trades, Portfolio) has the largest position with 0.99% of outstanding shares. Coatue Management LLC is also a shareholder.
Hershey
The confectioner, which is based in Pennsylvania, has a market cap of $16.28 billion; its shares were trading around $108.52 on Thursday with a price-earnings ratio of 19.56, a price-book ratio of 16.27 and a price-sales ratio of 2.98.
According to the Peter Lynch chart, the stock is overvalued.
Hershey’s financial strength was rated 5 out of 10 by GuruFocus. Although the company has issued approximately $1.3 billion in new long-term debt, it is at a manageable level due to sufficient interest coverage. In addition, the Altman Z-Score of 4.31 indicates the company is financially healthy.
The company’s profitability and growth fared better, scoring an 8 out of 10 rating. In addition to operating margin expansion, Hershey is supported by strong returns, a high Piotroski F-Score of 8, which suggests business conditions are healthy, and consistent earnings and revenue growth. The company also has a three-star business predictability rank. GuruFocus says companies with this rank typically see their stocks gain an average of 8.2% per year.
With 1.12% of outstanding shares, Jim Simons (Trades, Portfolio)’ Renaissance Technologies is the company’s largest guru shareholder. Other gurus invested in the stock are Pioneer Investments (Trades, Portfolio), George Soros (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Yacktman Asset Management (Trades, Portfolio) and Gabelli.
Tiffany
The New York-based jeweler has an $11.08 billion market cap; its shares were trading around $89.73 on Thursday with a price-earnings ratio of 25.40, a price-book ratio of 3.68 and a price-sales ratio of 2.54.
Based on the Peter Lynch chart, the stock appears to be overvalued.
Supported by good interest coverage and a robust Altman Z-Score of 5.85, GuruFocus rated Tiffany’s financial strength 7 out of 10.
The company’s profitability and growth scored an 8 out of 10 rating, driven by margins and returns that outperform competitors, a high Piotroski F-Score of 8, strong revenue and earnings growth and a three-star business predictability rank.
Steve Mandel (Trades, Portfolio) is the company’s largest guru shareholder with a 5.56% stake. Other top guru shareholders include First Eagle Investment (Trades, Portfolio), Jana Partners (Trades, Portfolio), Spiros Segalas (Trades, Portfolio), Pioneer, Ken Heebner (Trades, Portfolio), Simons’ firm, Ron Baron (Trades, Portfolio), Charles de Vaulx (Trades, Portfolio) and PRIMECAP Management (Trades, Portfolio).
Card Factory
The British greeting card company has a market cap of 661.16 million pounds ($845.02 million); its shares closed at 1.94 pounds on Wednesday with a price-earnings ratio of 10.76, a price-book ratio of 2.93 and a price-sales ratio of 1.57.
The Peter Lynch chart suggests the stock is undervalued.
Card Factory’s financial strength was rated 6 out of 10 by GuruFocus, boosted by adequate interest coverage and a high Altman Z-Score of 3.22.
The company’s profitability and growth scored a 7 out of 10 rating. Although the operating margin is in decline, it still outperforms 94% of industry peers. In addition, Card Factory has strong returns and a moderate Piotroski F-Score of 4.
No gurus currently have positions in the stock.
Disclosure: No positions.
