Foot Locker, Inc. – Value Analysis (NYSE:FL) : December 27, 2016

Capitalcube gives Foot Locker, Inc. a score of 78.

Our analysis is based on comparing Foot Locker, Inc. with the following peers – Genesco Inc., Finish Line, Inc. Class A, DSW Inc. Class A, Shoe Carnival, Inc., NIKE, Inc. Class B, Caleres, Inc. and Belle International Holdings Limited Unsponsored ADR (GCO-US, FINL-US, DSW-US, SCVL-US, NKE-US, CAL-US and BELLY-US).

Investment Outlook

Foot Locker, Inc. has a fundamental score of 78 and has a relative valuation of OVERVALUED.

Fundamental Score

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Company Overview

  • Considering peers, relative outperformance over the last year and the last month suggest a leading position.
  • Foot Locker, Inc. currently trades at a higher Price/Book ratio (3.61) than its peer median (1.74).
  • FL-US‘s operating performance is relatively good compared to its peers. The market currently does not expect high earnings growth relative to its peers but seems to expect the company to maintain its relatively high rates of return.
  • FL-US has relatively high profit margins while operating with median asset turns.
  • Compared with its chosen peers, changes in the company’s annual earnings are better than the changes in its revenue, implying better than median cost control and/or some economies of scale.
  • FL-US‘s return on assets currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • The company’s relatively high pre-tax margin suggests tight control on operating costs versus peers.
  • FL-US‘s revenue growth in recent years and current P/E ratio are both around their respective peer medians suggesting that historical performance and long-term growth expectations for the company are largely in sync.
  • The company’s level of capital investment suggests it might be under-investing in a business with above median returns.
  • FL-US has the financial and operating capacity to borrow quickly.

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Leverage & Liquidity

FL-US has the financial and operating capacity to borrow quickly.

  • With debt at a relatively low 1.57% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 1.93%), and a well-cushioned interest coverage level of 81.92x, FL-US can probably borrow quickly. We classify the company as Quick & Able in terms of its capacity to raise additional debt.
  • Of the 7 chosen peers for the company, only 4 of the stocks have an outstanding debt balance. Companies with no debt include DSW-US, SCVL-US and BELLY-US.

FL-US has maintained its Quick & Able profile from the recent year-end.

  • FL-US‘s interest coverage has declined 3.81 points from last year’s high but remains above its five-year average interest coverage of 62.17.
  • While its interest coverage decreased to 81.92x from 85.73x (in 2016), its peer median increased during this period to 179.76x from 115.97x.
  • Interest coverage fell 67.60 points relative to peers.
  • FL-US‘s debt-EV is similar to last year’s low of 1.55%, which compares to the 2012 high of 4.10%.
  • Compared to 2016, debt-EV has remained relatively stable for both the company (1.57%) and the peer median (1.93%).

Access the detailed analysis for Foot Locker, Inc.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Genesco Inc. 20.32 2.4 27.25 91.69
Finish Line, Inc. Class A 0 1.84 339.21 999
DSW Inc. Class A 0 2.45 1625.37 999
Shoe Carnival, Inc. 0 4.02 275.63 999
NIKE, Inc. Class B 2.3 3.06 95.77 282.11
Caleres, Inc. 18.4 2.46 8.73 83.42
Belle International Holdings Limited Unsponsored ADR 2.77 4.35 263.74 322.74
Foot Locker, Inc. 1.57 4.64 81.92 596.11
Peer Median 1.93 2.76 179.76 459.42
Best In Class 1.57 4.64 1625.37 999

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Company Profile

Foot Locker, Inc. engages in the global retail of athletically inspired shoes and apparel. It operates through the following segments: Athletic Stores and Direct-to-Customers. The Athletic Stores segment operates athletic footwear and apparel retailers in the world, with brands that include Foot Locker, Lady Foot Locker, SIX:02, Kids Foot Locker, Champs Sports, Footaction, Runners Point and Sidestep. The Direct-to-Customers segment includes Footlocker.com, Inc. and other affiliates, including Eastbay, Inc., and company’s international ecommerce businesses, which sell to customers through their Internet and mobile sites and catalogs. The company was founded in 1989 and is headquartered in New York, NY.

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