Fossil Group, Inc. – Value Analysis (NASDAQ:FOSL) : August 4, 2017

Capitalcube gives Fossil Group, Inc. a score of 44.

Our analysis is based on comparing Fossil Group, Inc. with the following peers – Movado Group, Inc., Swatch Group AG Unsponsored ADR, Citizen Watch Co, Ltd. Unsponsored ADR, Coach, Inc. and Casio Computer Co., Ltd. Unsponsored ADR (MOV-US, SWGAY-US, CHCLY-US, COH-US and CSIOY-US).

Investment Outlook

Fossil Group, Inc. has a fundamental score of 44 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • Considering peers, relative underperformance over the last year and the last month suggest a lagging position.
  • It trades at a lower Price/Book multiple (0.52) than its peer median (1.09).
  • The market expects FOSL-US‘s earnings to grow at about the same rate as its chosen peers and also does not seem to expect much improvement in its below peer median returns.
  • FOSL-US has relatively low net profit margins while its asset efficiency is relatively high.
  • Compared with its chosen peers, the company’s annual revenues and earnings change at a slower rate, implying a lack of strategic focus and/or lack of execution success.
  • Over the last five years, FOSL-US‘s return on assets has eroded from above median to below median among its peers suggesting declining relative operating performance.
  • The company’s median gross margin and relatively low pre-tax margin suggest high operating costs versus peers.
  • FOSL-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 seems appropriate to support the company’s growth.
  • FOSL-US might have enough interest coverage to take-on additional debt prudently.

Access our research and ratings on Fossil Group, Inc.

Leverage & Liquidity

FOSL-US might have enough interest coverage to take-on additional debt.

  • While FOSL-US‘s debt to enterprise ratio of 53.51% is on the high side compared to an overall benchmark of 25% (Note: The peer median is currently 15.64%), it also enjoys a relatively high interest coverage level of 4.28x which may give the company enough financial strength to support additional debt. Thus, the company is classified as having Some Capacity to raise more debt.
  • All 5 peers for the company have an outstanding debt balance.

FOSL-US has maintained its Some Capacity profile from the recent year-end.

  • FOSL-US‘s interest coverage is its lowest relative to the last five years and compares to a high of 96.66x in 2012.
  • The decrease in its interest coverage to 4.28x from 7.16x (in 2016) was also accompanied by a decrease in its peer median during this period to 44.92x from 47.01x.
  • Interest coverage fell 0.79 points relative to peers.
  • FOSL-US‘s debt-EV is its highest relative to the last five years and compares to a low of 1.49% in 2012.
  • Though its debt-EV increased to 53.51% from 40.45% (in 2016), its peer median remained relatively stable during this period at 15.64%.
  • Relative to peers, debt-EV rose 12.58 percentage points. Unlike the peer median, it is also above the 25% leverage benchmark.

Access the detailed analysis for Fossil Group, Inc.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Movado Group, Inc. 9.01 7.37 36.05 177.05
Swatch Group AG Unsponsored ADR 1.89 6.84 274.51 460.93
Citizen Watch Co, Ltd. Unsponsored ADR 25.94 3 53.79 48.72
Coach, Inc. 5.74 4.35 33.94 138.09
Casio Computer Co., Ltd. Unsponsored ADR 22.27 3.28 75.27 34.48
Fossil Group, Inc. 53.51 3.31 4.28 22.53
Peer Median 15.64 3.83 44.92 93.41
Best In Class 1.89 7.37 274.51 460.93

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Company Profile

Fossil Group, Inc. designs, markets and distributes consumer fashion accessories. Its products include men’s and women’s fashion watches, jewelry, handbags, small leather goods, belts, sunglasses, shoes, soft accessories and clothing which are sold through department stores, specialty retail locations, specialty watch and jewelry stores, owned retail and factory outlet stores, mass market stores, owned, and affiliate internet sites. The company was founded by Tom Kartsotis in 1984 and is headquartered in Richardson, TX.

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