As couples 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 $165 on Valentine's presents for their significant others, children, teachers and classmates, coworkers, friends and even pets this year. This is down from last year's record of $196.31. Total spending is projected to reach $21.8 billion, which is a decrease from $27.4 billion in 2020.
As candy, flowers and jewelry are some of the hottest gifts for lovebirds around the world, investors may be interested in finding value opportunities among companies that sell these items. According to the GuruFocus All-in-One screener, a Premium feature, as of Feb. 12, companies that profit from the holiday devoted to love include 1-800-Flowers.com Inc. (FLWS, Financial), The Hershey Co. (HSY, Financial), Movado Group Inc. (MOV, Financial) and Signet Jewelers Ltd. (SIG, Financial).
1-800-Flowers.com (FLWS, Financial) has a $2.06 billion market cap; its shares were trading around $31.77 on Friday with a price-earnings ratio of 20.36, a price-book ratio of 4.26 and a price-sales ratio of 1.11.
The GF Value Line shows the stock is significantly overvalued currently based on its historical ratios, past performance and future earnings projections.
The New York-based retailer, which is known for its floral arrangements and gourmet foods, has financial strength and profitability ratings of 8 out of 10 from GuruFocus. In addition to having adequate interest coverage, the Altman Z-Score of 4.05 indicates the company is in good standing. The return on invested capital also eclipses the weighted average cost of capital, indicating good value creation.
The company is also supported by operating margin expansion, good returns that outperform a majority of competitors and a moderate Piotroski F-Score of 6, which suggests business conditions are stable. Due to consistent earnings and revenue growth, the company also has a predictability rank of 3.5 out of five stars. According to GuruFocus, companies with this rank return an average of 9.3% annually over a 10-year period.
Of the gurus invested in 1-800-Flowers, Mario Gabelli (Trades, Portfolio) has the largest position with 0.87% of outstanding shares. Jim Simons (Trades, Portfolio)' Renaissance Technologies, Joel Greenblatt (Trades, Portfolio) and Steven Cohen (Trades, Portfolio) also own the stock.
Hershey (HSY, Financial) has a market cap of $31.51 billion; its shares were trading around $151.38 on Friday with a price-earnings ratio of 24.78, a price-book ratio of 18.26 and a price-sales ratio of 4.12.
According to the GF Value Line, the stock is modestly overvalued.
The Pennsylvania-based confectioner's financial strength was rated 5 out of 10 by GuruFocus. Although the company has issued approximately $1.1 billion in new long-term debt over the past three years, it is at a manageable level due to adequate interest coverage. In addition, the Altman Z-Score of 4.45 indicates the company is in good standing even though assets are building up at a faster rate than revenue is growing. The ROIC surpasses the WACC, however, meaning value is being created.
The company's profitability fared better, scoring an 8 out of 10 rating. In addition to operating margin expansion, Hershey is supported by strong returns that outperform a majority of industry peers, a moderate Piotroski F-Score of 5 and steady earnings and revenue growth. The company also has a 3.5-star predictability rank.
With 1.62% of outstanding shares, Simons' firm is Hershey's largest guru shareholder. Pioneer Investments (Trades, Portfolio), Cohen, Ray Dalio (Trades, Portfolio), Mairs and Power (Trades, Portfolio), Yacktman Asset Management (Trades, Portfolio) and Greenblatt also own the stock.
Based on the GF Value Line, the stock appears to be fairly valued currently.
The high-end watchmaker, which is based in Paramus, New Jersey, is known for its signature metallic dot that marks 12 o'clock and minimalist style. Movado' financial strength was rated 5 out of 10 by GuruFocus. Although it has a good cash-debt ratio of 1.33, the Altman Z-Score of 2.23 hints that it is under some financial pressure as its assets are building at a faster rate than its revenue is growing.
The company's profitability scored a 7 out of 10 rating. In addition to a declining operating margin, Movado is being weighed down by negative returns that underperform a majority of competitors. It also has a moderate Piotroski F-Score of 4, but the one-star predictability rank is on watch as a result of revenue per share declining over the past 12 months. GuruFocus data shows companies with this rank return an average of 1.1% annually.
Hotchkis & Wiley has the largest position in Movado with a 1.6% stake. Other top shareholders include Gabelli, John Rogers (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Simons' firm, Murray Stahl (Trades, Portfolio), Chuck Royce (Trades, Portfolio) and Barrow, Hanley, Mewhinney & Strauss.
The GF Value Line indicates the stock is significantly overvalued.
As the world's largest retailer of diamond jewelry, the Bermuda-based company has several well-known brands under its umbrella, including Kay Jewelers, Zales and Jared The Galleria of Jewelry. GuruFocus rated Signet's financial strength 5 out of 10. As a result of issuing approximately $54.7 million in new long-term debt over the past several years, the company has weak interest coverage. In addition, the Altman Z-Score of 1.83 indicates it is under some pressure since the company has recorded a loss in operating income over the past three years. The WACC also eclipses the ROIC, indicating value is not being created.
The company's profitability fared better with a 7 out of 10 rating. In addition to a declining operating margin, Signet's returns are negative and underperform a majority of industry peers. It is being supported, however, by a moderate Piotroski F-Score of 5. Due to a decline in revenue per share over the past year, the one-star predictability rank is on watch.
Disclosure: No positions.
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