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Despite organic improvements, Tapestry (NYSE:) has experienced stagnation in its share prices due to shrinking valuation multiples. The company’s recent acquisition of Capri Holdings (NYSE:) for $8.5 billion, financed through debt, has increased its net debt from $900 million to $9.4 billion as of today, Thursday.
Following the acquisition in 2023, TPR’s shares fell from the low-forties to $35 and further below $30. The Tapestry-Capri merger will consolidate an extensive portfolio of luxury brands, including Coach , which holds a significant presence in China. The luxury market in China is projected to reach $112 billion by 2025.
In the period from early January 2021 to 2023, TPR’s stock witnessed a 15% decline from $30 to around $25. This contrasts with the S&P 500’s 15% increase over the same approximate three-year period. TPR’s decrease has been uneven with returns of 31% in 2021, -6% in 2022, and -28% in 2023 year-to-date.
Looking ahead, Tapestry’s valuation stands at around $41 a share, which is 49% higher than the current market price. Trefis predicts TPR’s Q1 2024 revenues to reach around $1.6 billion, surpassing the consensus estimate. The company’s Q1 2024 earnings per share (EPS) are expected to be 93 cents according to Trefis analysis. For the full year 2024, Tapestry anticipates revenue nearing $6.9 billion, marking a 3% to 4% increase versus the prior year on both a reported and constant currency basis.
InvestingPro Insights
Tapestry’s recent performance and future prospects can be further illuminated by key metrics and insights from InvestingPro. According to real-time data, Tapestry’s management has been assertively buying back shares, a move usually indicative of confidence in the company’s future. Furthermore, Tapestry has been yielding a high return on invested capital and consistently increasing earnings per share.
In addition, Tapestry has been operating with a high return on assets and its revenue, despite recent declines, has been supported by impressive gross profit margins. This could be a positive sign for the company’s operational efficiency.
While Tapestry’s stock price has been volatile and has fallen significantly over the past few months, the company has maintained dividend payments for 15 consecutive years, offering a consistent return for investors.
In total, InvestingPro offers 18 valuable tips for Tapestry, providing a comprehensive overview of the company’s financial health and performance. For more detailed insights and tips, consider exploring the InvestingPro platform.
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