PVH Corp is the cheapest stock in its peer group
PVH Corp (PVH) is currently trading at one-year forward earnings multiple of 13.4x on a next-12-month earnings per share of $6.57. At this valuation, the company is at the bottom of the price-earnings range for its apparel peer group. PVH’s close competitors Ralph Lauren (RL) and VF Corporation (VFC) are trading at 16x and 20x. Kate Spade (KATE) is the most expensive in the group, valued at 32x.
Wall Street’s view on PVH
Of the 19 analysts who have rated PVH, 13 have recommended a “buy,” five a “hold,” and just one a “sell” on the stock. RL has gotten a “hold” rating from 12 out of 22 analysts, a “buy” from 9, and a “sell” by one. VFC has been recommended a “buy” by 22 out of 28 analysts, a “hold” by five, and a “sell” by one. Kate Spade bags the best ratings in the group despite the high valuations. It’s gotten a “buy” from 14 out of 20 analysts and a “hold” from six. None of the analysts have recommended a “sell” on the stock. All of the above ratings are as of March 18, 2016.
Are the valuations and recommendations justified on near-term growth?
You can justify PVH’s low price-to-earnings multiple compared to peers through the company’s low earnings potential in the near term. The company’s earnings are expected to fall, and PVH should register negative earnings per share growth of 9% over the next 12 months. Ralph Lauren is also expected to see its earnings fall—by 11% over the next year. Kate Spade, which is clearly the most expensive stock in the peer group and which commands the best analyst ratings, is forecast to grow more than 50% during the next year.
ETF investors seeking exposure to PVH could consider the First Trust Consumer Discretionary AlphaDEX (FXD), which invests 1.3% of its portfolio in PVH.