Tapestry Is Climbing, Time To Buy?

by Trefis Team
-30.07%
Downside
41.91
Market
29.31
Trefis
TPR
Tapestry
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Tapestry’s (NYSE:TPR) stock climbed 16.8% in the last 5 trading days, whereas the S&P 500 barely moved. Does this warrant an investment decision? We think that there is a very real possibility of a sustained upward trend. We arrive at our conclusion by assessing Tapestry’s recent market movement from three perspectives:

  1. relative positioning in the market
  2. underlying financial trends, and
  3. the output of the Trefis machine learning engine which looks at past patterns to predict near term behavior.

Our dashboard Big Movers: Tapestry Moved 16.8% – What Next? lays this out.

What relative positioning suggests: Are you a value investor who identifies and invests in under-priced securities based on market comparisons? Then this might be important to you.

Tapestry, Inc.’s stock price has decreased -43.6% this year, from $26.60 to $15.00, before moving 16.8% last week, and ending at around $17.50. So what do the multiples say? At the beginning of this year, Tapestry, Inc.’s trailing 12 month P/S ratio was 1.28. This figure decreased -34.6% to 0.84, before ending at 0.98. So Tapestry appears to be a cheaper stock now compared to where it was at the year’s  beginning. But is it cheaper than its peers? Compared to Tapestry, Inc.’s P/S multiple of 0.98, the figure for its peers Capri and Ralph Lauren stands at 0.69, and 1.13 respectively. So Tapestry is somewhere in the middle, giving it more room to grow.

What fundamentals suggest: Want to consider long term investment in Tapestry? Then pay attention here.

Tapestry, Inc.’s stock price increased 16.8% last week. However, the stock has decreased -38% between 2017 and 2019, and has decreased  -59% between 2017 and now. Thus, the recent move appears to be at odds with long-term trend. Can it hold up? We need to look at underlying financials for this. Tapestry, Inc.’s revenue has increased 34.3% from $4,488 Mil in 2017 to $6,027 Mil in 2019. However, for the last 12 months, this figure stood at $4,961 Mil, implying a decrease of -17.7% over 2019 numbers. As far as net margins are concerned, the figure has decreased -18.9% from 13.2% in 2017 to 10.7% in 2019 (note: margin increased from 2018 to 2019). For the last 12 months, it turned negative to -13.1%. It is apparent that the decline in the last 12 months is pandemic driven. The demand will return over time, making Tapestry an interesting long term bet.

What machine learning algorithm suggests: More interested in short term returns? Then you might want to give this perspective more weight.

Our AI engine analyzes past patterns in stock movements to predict near term behavior for a given level of movement in the recent period and suggests a significant 31% probability of Tapestry moving up another 10% over the next 21 trading days. Compared to this, the probability of moving down by same quantum is 20%, suggesting a greater likelihood of upside. Our detailed dashboard highlights the chances of Tapestry’s stock rising after a fall and should help you understand near-term return probabilities for different levels of movements.

Taking all 3 perspectives together, Tapestry can be a reasonable bet. But, what if you could invest in a winning portfolio? Here’s a top-quality portfolio to outperform the market, with over 100% return since 2016, versus 55% for the S&P 500. Comprised of companies with strong revenue growth, healthy profits, lots of cash, and low risk, it has outperformed the broader market year after year, consistently.

See all Trefis Price Estimates and Download Trefis Data here

What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For CFOs and Finance Teams | Product, R&D, and Marketing Teams

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