Tapestry Inc (TPR, Financial), a prominent player in the Retail - Cyclical industry, has long been recognized for its reputable brands such as Coach, Kate Spade, and Stuart Weitzman. Recently, the company experienced a daily gain of 1.22% and a notable three-month change of 52.52%. Despite these gains, insights from the GF Score suggest potential challenges ahead. The company's lower rankings in financial strength, growth, and valuation indicate that it may not sustain its historical performance. In this article, we delve into these critical metrics to understand the evolving narrative of Tapestry Inc.
Understanding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus, which evaluates five key aspects of valuation. This score has been shown to correlate closely with long-term stock performance, based on backtesting from 2006 to 2021. Stocks with higher GF Scores tend to generate better returns compared to those with lower scores. The GF Score ranges from 0 to 100, with 100 being the highest possible rank. For Tapestry Inc, the GF Score is composed of the following elements:
- Financial strength rank: 5/10
- Profitability rank: 8/10
- Growth rank: 5/10
- GF Value rank: 1/10
- Momentum rank: 6/10
Based on this methodology, GuruFocus has assigned Tapestry Inc a GF Score of 68 out of 100, indicating a limited potential for future outperformance.
Company Overview
Tapestry Inc, with a market capitalization of $18.16 billion and sales amounting to $6.78 billion, operates renowned fashion and accessory brands including Coach, Kate Spade, and Stuart Weitzman. The company sells its products through approximately 1,400 company-operated stores, wholesale channels, and e-commerce platforms across North America, Europe, Asia, and other regions. Coach, which accounts for 76% of sales, is known for its affordable luxury leather products, while Kate Spade, contributing 20% of sales, is recognized for its vibrant patterns and graphics. Stuart Weitzman, generating 4% of revenue, focuses on women's luxury footwear.
Financial Strength Analysis
Tapestry Inc's financial strength metrics reveal some concerns regarding the company's balance sheet health. The low cash-to-debt ratio of 0.24 suggests challenges in managing existing debt levels. Furthermore, the company's debt-to-equity ratio stands at 3.07, which is worse than 91.48% of companies in the Retail - Cyclical industry. A high debt-to-equity ratio indicates a reliance on borrowing, making the company vulnerable to market fluctuations.
Conclusion
In conclusion, Tapestry Inc's financial strength, profitability, and growth metrics, as highlighted by the GF Score, suggest potential underperformance in the future. While the company has a strong brand presence and a diverse product portfolio, its financial challenges and valuation concerns may hinder its ability to outperform. Investors should carefully consider these factors when evaluating Tapestry Inc's potential for future growth. For those interested in exploring companies with strong GF Scores, GuruFocus Premium members can utilize the following screener link: GF Score Screen.
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.
