Canada Goose Holdings Inc (GOOS, Financial) has recently experienced a daily loss of 5.2% and a 3-month decline of 16.68%, while maintaining an Earnings Per Share (EPS) of $0.36. These figures prompt an essential question for investors: Is Canada Goose Holdings significantly undervalued? The following valuation analysis seeks to uncover the answer, inviting readers to delve into the financial intricacies that determine the stock's true worth.
Company Introduction
Canada Goose Holdings Inc (GOOS, Financial) stands as a premium outerwear designer and retailer, with a diverse operation spanning Wholesale, Direct to Consumer (DTC), and Other segments. The DTC segment, as the primary revenue driver, capitalizes on e-commerce and exclusive retail stores in luxury locales. The Wholesale segment caters to a variety of high-end department stores, specialty outlets, and distributors across the globe. By juxtaposing the company's stock price against the GF Value—an estimate of intrinsic value—we set the stage for a deeper evaluation of Canada Goose Holdings' financial standing.
Summarize GF Value
The GF Value is a unique metric that captures the intrinsic value of a stock, factoring in historical trading multiples, a GuruFocus adjustment for past returns and growth, and projected business performance. It serves as a benchmark for the stock's ideal trading value. When a stock's price greatly exceeds the GF Value Line, it may be overvalued, suggesting lower future returns. Conversely, a price well below the GF Value Line indicates potential undervaluation and higher future returns.
Currently, Canada Goose Holdings (GOOS, Financial), with its share price at $12.04 and a market cap of $1.20 billion, appears to be significantly undervalued according to our valuation method. This suggests that the long-term return on its stock could outpace the company's business growth.
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Financial Strength
Assessing a company's financial strength is crucial to avoid the high risk of permanent capital loss. Key indicators such as the cash-to-debt ratio and interest coverage are instrumental in this evaluation. Canada Goose Holdings' cash-to-debt ratio stands at 0.04, ranking lower than 85.84% of its industry peers. Consequently, with a financial strength rating of 4 out of 10, Canada Goose Holdings' fiscal health is considered weak.
Profitability and Growth
Consistent profitability over time signals reduced investment risk. Canada Goose Holdings has achieved profitability for 9 out of the past 10 years, boasting a robust operating margin of 9.23%, which outperforms 75.07% of its competitors in the Manufacturing - Apparel & Accessories industry. This has earned the company a strong profitability rank of 8 out of 10.
Growth is a pivotal valuation factor, as it is closely linked to long-term stock performance. Canada Goose Holdings has seen a 3-year average annual revenue growth of 10.2%, ranking above 71.02% of its industry counterparts. However, its 3-year average EBITDA growth rate of 1.4% falls short, ranking lower than 60.44% of the industry.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) provides insight into its value creation efficiency. A higher ROIC than WACC suggests that the company is generating value for its shareholders. Over the past 12 months, Canada Goose Holdings has reported an ROIC of 7.5, which unfortunately falls below its WACC of 11.19, indicating potential challenges in creating shareholder value.
Conclusion
Summarily, Canada Goose Holdings (GOOS, Financial) exhibits clear signs of being significantly undervalued. Despite its weak financial condition, the company's profitability remains strong. However, its growth ranks below the median when compared to industry peers. For a thorough understanding of Canada Goose Holdings' financial health, interested parties are encouraged to review its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
