For the past several months, apparel prices have been on the rise, and while that may be a pain for shoppers, it presents an interesting opportunity for investors. So, let’s take a look at VF Corporation (NYSE:VFC), which is a apparel and footwear powerhouse with over 30 brands under its umbrella.
Company Overview: With under $9.5 billion in annual sales, VF is the world’s largest apparel company, and it’s easy to see why. The company is responsible for at least 30 major brands, including Lee, Wrangler, the North Face, Timberland and Vans.
The company’s largest and fastest-growing business is its Outdoor & Action Sports segment, which accounts for half of global revenues. In addition, the company also runs Sportswear, Contemporary Brands, Jeanswear and Imagewear businesses. This company employs 58,000 worldwide and its products are sold in more than 150 countries.
Industry Breakdown: Out of the 119 companies in the Apparel industry, VFC ranks towards the top in terms of most fundamental metrics.
To start, this is the ninth-largest apparel company by market cap and VF’s 1.9% dividend yield is fourth-highest in the industry. The company’s Price/Earnings to Growth ratio is also ninth highest. From there, sales growth (37%), earnings growth (363%), the long-term growth rate (13%) and return on equity (21%) all score in the top quartile.
VF’s main competitors are Gap (NYSE:GPS) and Sears (NASDAQ:SHLD). Of those three companies, VF’S sales growth, gross margin and operating margin come out on top.
Earnings Buzz: VF is scheduled to report earnings before the opening bell on Friday, April 27. Currently, analysts forecast 24.7% sales growth and 2.7% earnings growth. Now, this may seem like a modest bottom-line gain, but it’s relatively strong compared with the rest of the apparel industry, which is forecast to post a 13.5% profit loss.
Moreover, this company has posted earnings surprises for each of the past four quarters, three of which were double-digit earnings surprises.
Current Ratings: Before you buy any stock, you should always run it through my free Portfolio Grader ratings system. This stock has improved significantly over the past year—in April 2011, VFC was a C-rated hold.
Since then, the company has firmed up several of its financial metrics; its sales and earnings growth as well as earnings momentum and return on equity all receive top marks.
However, the company could stand to improve its earnings surprises track record as well as earnings revisions and cash flow. What really makes this stock a strong buy is its top-notch level of buying pressure.
Bottom Line: VFC is an A-rated strong buy.
Recommendation: Strong Buy
Sound Off: What do you think about VFC? Are you a buyer at current prices? Let me know what you think by posting on our wall on Facebook.