Is The Guess Stock Price Driven By Current Earnings Or By Market Sentiments?
The Price to Earnings ratio gives us the ability to judge whether a stock is reasonably priced or not. In this analysis, we will use the PE ratio to estimate whether Guess’s stock price is driven by current earnings or by sentiments, i.e. expectations of future earnings by the current PE ratio of the company to that of the industry’s.
One is willing to pay around $3.85 more for Guess’s stock price (~33% above the stock price as per industry) in expectation of future growth. In a previous analysis, we have estimated that almost 51% of the stock price is influenced by future expectations of earnings growth. You can view this analysis here.
Reasons That Might Be Impacting The Investors’ Positive Outlook:
- Guess is aiming to recover from its struggles in its most important regions of operation. Towards that end, the company hired Victor Herrero as its new CEO in 2015.
- Herrero had chalked a 5-pronged strategy to revive Guess, which has been set in motion. Asia will be the primary focus for Guess’s future growth.
- In its fiscal 2016 year end call, the company announced that it plans on increasing its revenues from $2.2 billion to $3 billion in the next three years, translating to a CAGR of 11%. This revenue growth will be primarily driven by e-commerce, new store openings, and comparative store sales growth.
- The company is in the process of building a major business in Asia, with a focus on China, where it will more than double its number of stores.
Have more questions about Guess? See the link below.
- What Is Guess’s Revenue And EBITDA Breakdown?
- How Has Guess’s Revenue And EBITDA Composition Changed Over 2012-2016E?
- Guess Q4 FY2016 Pre-Earnings Report
- What Led To Guess’ Revenue And EBITDA Decline Over The Last Five Years?
- Guess: Fiscal Year 2016 In Review
- How Did Guess’s Stock Perform Vis-A-Vis Its Peers Over The Last 5 Years ?
- What Is Guess’ Fundamental Value Based On 2016 Estimated Numbers?
- How Did Guess’ Different Segments Perform Over The Last 5 Years?
- Guess Q1 FY 2017 Earnings Preview
- Key Takeaways From Guess’s Q1 FY 2017 Earnings
- Guess’s Expected Revenue And EBITDA For 2016: Trefis Estimate
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