Summary: OVERPRICED
Score: 5/20
MOS: 0%
Share Price: $88
Sticker Price: $5
Is VF Corporation stock a good buy?
VF Corporation is an American based apparel and footwear company founded in 1899 and headquartered in Denver, CO. The company has more than 30 brands that are organized into three categories including Outdoor, Active and Work. VF Corp controls 55% of the U.S. backpack market with the JanSport, Eastpak, Timberland, and North Face brands.
CNBC recently rated VF Corp as a BUY because of its P/E (Price to Earnings) Ratio of 62.
The P/E Ratio is a misleading calculation and here is why:
Generally speaking, a high P/E indicates that investors expect higher earnings and therefore the share price will rise. On the other hand, a high P/E ratio can also indicate the stock is overvalued.
On the flip side, when a company’s stock has a low P/E, it may indicate that the stock has low earnings and the share price will fall. On the other hand, a low P/E ratio can also indicate the stock is undervalued.
Overall, P/E Ratio can be GOOD or BAD, no matter what the number is. That doesn’t help you or I. The P/E Ratio does not give us a definitive decision on whether to BUY or SELL a stock.
If you’ve ever seen the movie, Moneyball, it’s like drafting a baseball player because he’s “handsome” or because he has a “good swing.” As you learn in the movie, wins are not based on physical looks or how you swing a baseball bat, it’s based on math. The common denominator with wins is based on how many times you can get on base.
The P/E Ratio is composed of 2 variables and 1 calculation over the current year. (Share Price / EPS).
In comparison, Tykr uses 50 variables and 50 calculations over 5 years. Overall, Tykr is significantly more rigorous than the P/E Ratio. If you want to REALLY understand how a stock will most likely perform, you’ll need to apply more rigor.
If you’re looking for some retail stocks to add to your portfolio, take a look at these two:
Stock: LULU (Lululemon)
Summary: ON SALE
Score: 15/20
MOS: 63%
Share Price: $371
Sticker Price: $1,071
Stock: CROX (Crocs)
Summary: ON SALE
Score: 12/20
MOS: 79%
Share Price: $63
Sticker Price: $317
Be careful with the news. I like to hear what news sources such as CNBC are saying but I always use Tykr as the voice of truth to prove if “guru’s” actually know what their talking about. As you can see, making a decision simply based on P/E Ratio isn’t rigorous enough to make a logical decision. With VF Corp the score of 5/20 shows the financials are just too weak to even take a look. With a MOS of 0% (Share Price of $88 vs a Sticker Price of $5) this stock could lose you a lot of money.
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The Summary, Score, and MOS of this stock may have changed since the posting of this review. Please login to Tykr to see up-to-date information.