Is Kontoor Brands Mispriced After Recent Market Rally and Product Innovation News?

• Wondering whether Kontoor Brands might be a hidden gem or simply priced just right? If recent chatter about finding value in overlooked consumer brands has you interested, you are in the right place.
• Kontoor Brands’ stock has shown some spirited movement lately, climbing 7.2% in the past week, even though it remains down 12.7% year to date and 15.8% lower than a year ago.
• The stock’s recent swings come as the company has been featured in industry news for its product innovation and efforts to expand market reach, especially in response to shifting consumer tastes. Notably, Kontoor's collaborations and licensing strategy have grabbed attention, framing the backdrop for ongoing discussions about its brand value and resilience.
• When it comes to valuation, Kontoor Brands notched a strong 5 out of 6 on our value score, indicating strength across multiple key checks. In the next section, we will break down exactly how that score is calculated using different approaches, and explain why there is an even smarter way to size up whether the stock is really undervalued, so stay tuned.

Find out why Kontoor Brands's -15.8% return over the last year is lagging behind its peers.

Approach 1: Kontoor Brands Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates what a company is worth by projecting its future cash flows and discounting them back to their value today. For Kontoor Brands, this involves analyzing the company’s expected ability to generate cash in upcoming years and then using a discount rate to calculate what those future dollars are worth in present terms.

Currently, Kontoor Brands’ Free Cash Flow (FCF) stands at $219.7 million. According to projections, FCF is expected to rise to $375.6 million by 2027. Simply Wall St’s model extends these estimates out a full decade, projecting FCF to reach roughly $424.9 million by 2035. Only the next five years are based on analyst estimates, while longer-term figures are extrapolated.

Taking these forecasts into account, the DCF model calculates a fair intrinsic value of $92.90 per share, suggesting that Kontoor Brands’ stock is trading at a 20.1% discount to its assessed worth. This may indicate that the market is underestimating the company’s capacity to generate cash in the years ahead.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Kontoor Brands is undervalued by 20.1%. Track this in your watchlist or portfolio, or discover 928 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Kontoor Brands.

Approach 2: Kontoor Brands Price vs Earnings

For profitable companies like Kontoor Brands, the Price-to-Earnings (PE) ratio is a widely used measure for stock valuation. It tells you how much investors are willing to pay for each dollar of earnings and is especially meaningful when earnings are steady and positive, as it allows for direct comparison with industry peers and historical norms.

A company’s "normal" or "fair" PE depends on future growth prospects and perceived risks. Higher expected growth or a stable, lower-risk profile justifies a higher PE, while slower growth or elevated risks tend to suppress the multiple investors are ready to pay.

Currently, Kontoor Brands trades at a PE of 19.0x, just below the luxury industry average of 20.2x and well under its peer group average of 30.5x. Simply Wall St's proprietary "Fair Ratio" for Kontoor Brands is 19.6x, which evaluates where the multiple should sit after factoring in earnings growth outlook, margins, industry dynamics, market cap, and company-specific risks.

The Fair Ratio is more insightful than simply comparing PE against peers or the industry. This is because it proactively accounts for context-specific factors like Kontoor Brands' unique growth profile, profitability, and risk attributes, providing a truer sense of fair value for this business.

Given that the company’s current PE of 19.0x is closely aligned with its Fair Ratio of 19.6x, the evidence points to Kontoor Brands being fairly valued by this measure.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1440 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Kontoor Brands Narrative

Earlier, we mentioned there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is simply the story behind the numbers, a set of your own assumptions about what Kontoor Brands could achieve, such as future revenue, earnings, or margins. These are linked directly to a fair value and the company’s financial outlook. Narratives let you frame the company’s story in a context that makes sense for you, then instantly see an up-to-date fair value right on Simply Wall St’s Community page, which millions of investors use daily to compare perspectives and forecasts.

Narratives aren't static, either. They automatically update when new news, data, or earnings are released, keeping your outlook and fair value current in real time. For example, one investor may build a bullish Narrative that expects Kontoor Brands to surge as Helly Hansen integration accelerates growth and margins, justifying a fair value above $99. Another, more cautious investor might worry about legacy brand risks or digital competition, supporting a lower fair value near $49. By comparing these Narratives to Kontoor’s current share price, investors can make more informed decisions, grounded in transparent, dynamic scenarios that adapt as the facts change.

Do you think there's more to the story for Kontoor Brands? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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