I was looking for stocks that are in the consumer goods sector with a market capitalization greater than or equal to $8 billion, a current ratio greater than or equal to 2 and a price-earnings (P/E) ratio between 0 and 20. I ended up with these three stocks:
Foot Locker Inc. (FL, Financial), the U.S. multination retailer of casual clothes and footwear headquartered in New York, is trading at $50.65 per share with a market capitalization of $6.608 billion, a price-book (P/B) ratio of 2.36 and a price-sales (P/S) ratio of 0.85.
For the second fiscal quarter and for the entire year, analysts forecast that Foot Locker will invoice its customers for $1.81 billion and $8.11 billion, a 1.90% and 4.40% increase from the comparable period of one year ago. Backed on these average estimates for quarterly and yearly revenues, the company is expected to report an EPS of 92 cents at the end of the second fiscal quarter and an EPS of $5.14 at the end of the year.
The stock has been uptrending again since June 27, but it lost 28.6% year to date. For Foot Locker analysts have set a target price per share of $71.10 which represents about 40.4% upside from the current market valuation. The stock has a forward P/E ratio of 9.06 that multiplied by an EPS of $5.15, as forecasted by the analysts for full fiscal 2017, gives a value of $46.66 per share.
For the 2017-2018 period analysts forecast a growth rate of 7.6% and for the next five years analysts forecast an annual growth rate of 7.58%.
Foot Locker has $1.05 billion in cash on hand and securities or $7.99 per share as of the most recent quarter. A total debt (mrq) of $127 million and a total equity value of $2.822 billion led to a total debt-equity (mrq) ratio of 4.50% versus an industry average of 84.54. The company has an interest coverage (TTM) of 317.67 versus an industry average of 45.41. It means that Foot Locker can easily pay interest expenses on the outstanding debt, and it is better positioned than its peers.
The current portfolio of activities allows the company to easily generate an operating cash flow of $750 million to $800 million every year, of which a percentage ranging between 65% and 70% is the free cash flow.
In 2016 the company paid out $147 million in dividend and $41 million in the first three months of fiscal 2017.
Foot Locker distributes an annual dividend of $1.24 per share – through quarterly payments of 31 cents – for a dividend yield of 2.52%.
Michael Kors Holdings (KORS, Financial), the U.S. luxury fashion company that designs and retails branded apparel for men and women, is currently trading at $36.23 per share with a market capitalization of $5.647 billion, a P/B ratio of 3.54 and a P/S ratio of 1.26.
For the first quarter of fiscal 2018, which ended June 30, analysts forecast that Michael Kors Holdings will report revenues coming in at $919.22 million, a 7% decrease from the first quarter of fiscal 2017 and an EPS of 62 cents, a 29.5% decrease from the bottom line of the comparable quarter of 2017.
For full fiscal 2018, analysts forecast that Michael Kors Holdings will close the income statement showing a bottom line of $3.56 as EPS. If the company meets analysts’ expectations on full 2018 earnings, this will represent a 16% decrease from the EPS of full fiscal 2017.
If we multiply the EPS of $3.56 – as forecasted by the average analysts for the entire year of 2017 – by the forward P/E ratio of 9.93, we obtain a value of $35.35 per share which is slightly lower than the current share price. The analysts’ average target price per share is $37.35. This means that analysts foresee only 2.8% upside in the market value of this apparel stock over the coming 12-month period.
For the next year analysts forecast a growth rate of 2.50%, but for the next five-year period, analysts forecast an annual growth rate of -2.35%.
As of the most recent quarter the company had approximately $227.7 million and a total debt of $133.1 million. The debt-equity ratio is 8.36, considerably lower than the average industry ratio of 84.54. The interest coverage ratio – computed over the last 12 trailing months – is 182.46. Michael Kors Holdings doesn’t have troubles in paying interest expense on the outstanding debt.
The third stock of this brief list is Trinseo SAĂ‚ (TSE, Financial), a U.S. global manufacturer of synthetic rubber, latex binders and plastic products that it markets in the Americas, Europe and Asia Pacific.
The specialty chemicals stock is currently trading at $70.70 per share with a market capitalization of $3.11 billion, a P/B ratio of 5.83 and a P/S ratio of 0.79.
For Trinseo the average target price per share is $72.67, which represents a mean of nine analysts’ estimates who were surveyed and only 2.8% upside from the current share price. The recommendation rating is 2.3 out of 5.
Trinseo has a forward P/E ratio of 8.77 and for full fiscal 2017 analysts foresee an EPS of $7.51 on average. The two estimates lead to a value of $65.86, which is 6.8% lower than the current share price.
For the second quarter of fiscal 2017 analysts forecast that an average EPS of $1.8 will be backed on an average figure for revenues of $1.08 billion. While the forecasted EPS represents a 21.7% decrease on a year-over-year basis, revenues are – on the contrary – foreseen to increase by 11% year over year.
Trinseo’s earnings are set to grow 7.3% from full fiscal 2017 to full fiscal 2018. The annual growth rate over the next five years following fiscal 2017 is, according to analysts, 5.27%.
The company has approximately $410.14 million as of the most recent quarter and a total debt/equity (mrq) ratio of 219.40 which is well above the industry’s average of 39.67.
Trinseo pays a total dividend per share of $1.44 to the shareholders for a dividend yield of 2.10%.
Disclosure: I have no positions in any stock mentioned in this article.
