Michael Kors offers aggressive growth

The luxury apparel and accessories brand is new to the market but is already rated a 'strong buy.'

By Zacks.com Jun 5, 2012 10:23AM

By Brian Bolan
 

Michael Kors (KORS) is new to the market but has already become a Zacks No. 1 rank ("strong buy").

 

Michael Kors sells branded women's apparel and accessories, as well as men's apparel. The company sells its products primarily under the names of Michael Kors, MICHAEL Michael Kors and KORS Michael Kors. The company was founded in 1981 and is based in Tsim Sha Tsui, Hong Kong.
 

Michael Kors topped the Zacks consensus estimate in its only quarter as a public company. On Feb. 24, the company reported earnings per share of $0.19, which was $0.10, or 111%, ahead of the Zacks consensus estimate.


Revenue also topped expectations. The Zacks consensus estimate called for $351 million in sales, and the company posted $374 million. The $22 million upside surprise translates into a 6% revenue beat.

 

The company is expected to release earnings again on June 12. The current Zacks consensus estimate is calling for $361 million in revenue and $0.16 in earnings per share.


Estimates moving higher

Estimates for Michael Kors have been rising. The Zacks consensus estimate for 2012 for Michael Kors Automotive stood at $0.74 earnings per share as of January. The consensus has since moved higher to $0.99. Over the same period, estimates for 2013 earnings per share have moved from $0.98 to $1.24. The implied earnings growth rate of more than 24% is just what aggressive-growth investors are seeking.


Michael Kors has a limited operating history, so its metrics for valuation purposes are not terribly relevant. The 9x trailing earnings are below the industry average of 20x earnings, but the forward price-to-earnings ratio of 39 is well above the industry average of 17. The 20x price-to-book multiple is likely to come down over time, as is the 9x price-to-sales multiple.


The stock has broken below the 21- and 50-day moving averages. With its limited history, this doesn't speak too loudly. With increasing estimates and a another beat on the top and bottom line, investors can continue to see KORS looking good in their stock portfolios.
 

Brian Bolan is a strategist for Zacks.com. He is also the editor in charge of the Zacks Home Run Investor service. Follow Brian Bolan on twitter at @BBolan1.

Tags: KORS
2Comments
Jun 5, 2012 2:21PM
avatar
  People need to be skeptical when you read an article written by someone who's entire basis of his recommendation is a company he's a strategist with and even further when he's also the editor in charge of that companies "home run investor service". Though i have no opinion on this company i do know it's more likely his intent is to provide a home run for his paid investors who've already bought this stock than those getting this information now. If you buy based on this article i'm sure his investors will thank you.
Jun 5, 2012 2:38PM
avatar

Article quote: Michael Kors topped the Zacks consensus estimate in its only quarter as a public company. On Feb. 24, the company reported earnings per share of $0.19, which was $0.10, or 111%, ahead of the Zacks consensus estimate.

 

 I wonder why after exceeding expectations by so much on feb. 24th this stock has dropped almost $10 a share? It doubles growth but loses 25% in stock value.

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