Amid the fluctuations of the stock market, Canada Goose Holdings Inc (GOOS, Financial) presents a noteworthy case for investors, with a daily gain of 10.4% but a 3-month loss of 17.4%. With an Earnings Per Share (EPS) sitting at $0.36, the question arises: is Canada Goose Holdings significantly undervalued? The following analysis delves into the valuation of this premium outerwear company, offering insights into whether its current market price reflects its true worth.
Company Introduction
Canada Goose Holdings Inc (GOOS, Financial), a Canadian enterprise known for its high-end outerwear, has woven its operations into three segments: Wholesale, Direct to Consumer (DTC), and Other. The DTC segment, a primary revenue driver, includes sales from country-specific e-commerce platforms and company-owned retail stores situated in luxury shopping destinations. The Wholesale segment caters to a diverse range of retailers and international distributors. With a global footprint extending across Canada, the United States, Asia, Europe, and beyond, Canada Goose Holdings (GOOS) now faces an analytical spotlight comparing its stock price of $12.53 to the GF Value of $28.33, an estimation of fair value.
Summarize GF Value
The GF Value is a unique measure of the intrinsic value of a stock, incorporating historical trading multiples, a GuruFocus adjustment factor based on past returns and growth, and projections of future business performance. This metric serves as a benchmark for the stock's fair trading value. When a stock's price significantly exceeds the GF Value Line, it may be overvalued, potentially leading to poor future returns. Conversely, a price well below the GF Value Line suggests undervaluation and the possibility of higher future returns.
Canada Goose Holdings (GOOS, Financial) appears to be significantly undervalued with a market cap of $1.30 billion and a robust indication that the long-term return on its stock could outpace its business growth, given its current price point.
Financial Strength
Investing in companies with solid financial strength minimizes the risk of capital loss. Key indicators such as the cash-to-debt ratio and interest coverage provide insights into a company's financial robustness. Canada Goose Holdings' cash-to-debt ratio stands at 0.04, which is lower than 86.1% of its peers in the Manufacturing - Apparel & Accessories industry. This metric, alongside an overall financial strength ranking of 4 out of 10, highlights that Canada Goose Holdings' financial situation could be stronger.
Profitability and Growth
Companies with a track record of profitability, particularly those with high profit margins, offer safer investment opportunities. Canada Goose Holdings has maintained profitability for 9 out of the past 10 years. With a revenue of $910.40 million and an Earnings Per Share (EPS) of $0.36, the company boasts an operating margin of 9.23%, ranking favorably against 75.19% of its industry counterparts. This solidifies Canada Goose Holdings' profitability rank at 8 out of 10.
When it comes to growth, the company's 3-year average annual revenue growth of 10.2% outperforms 71.43% of the industry. However, its 3-year average EBITDA growth rate of 1.4% falls short when compared to industry standards.
ROIC vs WACC
Evaluating a company's Return on Invested Capital (ROIC) against its Weighted Average Cost of Capital (WACC) provides insight into its profitability relative to the capital invested. A ROIC that surpasses the WACC suggests value creation. Over the past year, Canada Goose Holdings' ROIC was 7.5, while its WACC stood at 11.33, indicating challenges in generating cash flow in excess of the cost of capital.
Conclusion
In summary, Canada Goose Holdings (GOOS, Financial) is significantly undervalued. While its financial condition could be improved, the company demonstrates strong profitability. However, its growth ranking does not outshine the majority of its industry peers. For a more detailed financial overview, interested parties can review Canada Goose Holdings' 30-Year Financials here.
To discover high-quality companies that may deliver above-average returns, consider exploring the GuruFocus High Quality Low Capex Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
