Make better investment decisions with Simply Wall St’s easy, visual tools that give you a competitive edge.
Tapestry’s share price has delivered a very large 5 year return. At around US$141 a share the stock screens as fairly valued on a Discounted Cash Flow (DCF) estimate, while earnings based multiples suggest it is on the expensive side.
-
Tapestry has returned about 302% over 5 years, which focuses attention on whether most of the value from its turnaround and growth efforts is already reflected in the share price.
-
Hiring a new chief marketing officer at Kate Spade may support efforts to stabilise and then rebuild that brand, but the long run sales declines there remain a key risk for group cash flow and valuation.
-
Tapestry scores just 1 out of 6 on our value checks, which leans more toward a stock that is not a clear bargain on broader valuation measures.
The issue now is whether Tapestry’s current price leaves enough upside versus intrinsic value to compensate for the brand repair work that still lies ahead.
Does Tapestry Look Fairly Valued on Cash Flow?
The Discounted Cash Flow (DCF) model estimates what Tapestry’s future cash flows are worth in today’s dollars. On the latest figures, the company is generating about $1.76b in free cash flow over the last twelve months, and the model assumes these cash flows keep growing rather than shrinking. On that basis, the 2 Stage Free Cash Flow to Equity model points to an intrinsic value of about $149 per share.
Against a current share price of around $141, Tapestry screens as roughly 5% undervalued on this cash flow view, which is a modest gap rather than a deep discount. News of a new chief marketing officer at Kate Spade, brought in to address a long run sales slide, helps explain why the market is still assigning some caution even though the DCF output sits a little higher than the price.
Overall, the Discounted Cash Flow workup suggests Tapestry appears to be roughly fairly valued, with only a small implied upside at today’s price.
Tapestry is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment’s notice. Track the value in your watchlist or portfolio and be alerted on when to act.
Does Tapestry Look Pricey on Earnings?
The P/E ratio is a useful cross check for Tapestry because earnings are a core focus for many investors in established consumer brands. Tapestry currently trades on a P/E of about 43.1x, which is well above the Luxury industry average of roughly 21.8x and also above the peer group average of around 24.1x.
