PVH Corp.’s Valuations and Stock Performance



Stock price movement

PVH Corp.’s (PVH) improving margins and growing sales have been well accepted by investors. After recording a ~50% growth in its stock in 2017, the stock has risen 11% so far this year as of August 21. It has outperformed the S&P 500 Index, which has risen 7% YTD (year-to-date).

It’s interesting to note that despite strong returns, PVH is an average performer in the apparel and accessory group. The seven-company S&P 500 apparel and accessory index has gained ~20% YTD. Competitors VF Corporation (VFC) and Ralph Lauren (RL) have soared 24% and 34%, respectively.

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A look at PVH’s valuations

PVH Corp. is currently trading at a one-year forward PE ratio of 16.2x compared to a three-year average of 14.7x. Although the fashion retailer is slightly expensive in its historical valuations, it still has average relative valuations. It trades at a premium to Hanesbrands (HBI) at 10.6x and Michael Kors (KORS) at 14.9x, and at a discount to Ralph Lauren (RL) at 20.9x and VF Corporation (VFC) at 24.3x.

How attractive are PVH’s valuations?

Let’s look at PVH Corp.’s earnings potential and compare it with its competitors. Looking at the near term, or over the next year, PVH looks more attractive than many of its peers. Its EPS is expected to increase 8.9% over the next 12 months.

In comparison, Hanesbrands and Michael Kors, which trade at a discount to PVH, are likely to record a 1.1% and 0.1% decline, respectively, in their earnings. VFC, which has higher valuations than PVH, is expected to see a solid next-12-month EPS growth of 18.5%, while Ralph Lauren, which also trades at a premium, is projected to see a modest increase of 3.4%.

In the next and final part of this series, we’ll look at analysts’ recommendations for PVH.


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