Is Tapestry, Inc.’s (NYSE:TPR) Future Growth Already Accounted For In Today’s Price?

Growth expectations for Tapestry, Inc. (NYSE:TPR) are high, but many investors are starting to ask whether its last close at $30.78 can still be rationalized by the future potential. Let’s look into this by assessing TPR’s expected growth over the next few years.

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See our latest analysis for Tapestry

What can we expect from Tapestry in the future?

According to the analysts covering the company, the following few years should bring about good growth prospects for Tapestry. The consensus forecast from 30 analysts is certainly positive with earnings per share estimated to rise from today’s level of $2.444 to $3.409 over the next three years. This indicates an estimated earnings growth rate of 12% per year, on average, which indicates a solid future in the near term.

Can TPR’s share price be justified by its earnings growth?

Stocks like Tapestry, with a price-to-earnings (P/E) ratio of 12.6x, always catch the eye of investors on the hunt for a bargain. In isolation, this metric can be a bit too simplistic but in comparison to benchmarks, it tells us that TPR is undervalued relative to the current US market average of 17.74x , and undervalued based on its latest annual earnings update compared to the Luxury average of 17.18x .

NYSE:TPR Price Estimation Relative to Market, May 20th 2019
NYSE:TPR Price Estimation Relative to Market, May 20th 2019

Tapestry’s price-to-earnings ratio stands at 12.6x, which is low, relative to the industry average. This already suggests that the stock could be undervalued. However, since Tapestry is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 12.6x and expected year-on-year earnings growth of 12% give Tapestry an acceptable PEG ratio of 1.02x. Based on this growth, Tapestry’s stock can be considered slightly overvalued , based on fundamental analysis.

What this means for you:

TPR’s current overvaluation could signal a potential selling opportunity to reduce your exposure to the stock, or it you’re a potential investor, now may not be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I urge you to complete your research by taking a look at the following:

  1. Financial Health: Are TPR’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  2. Past Track Record: Has TPR been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of TPR’s historicals for more clarity.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.