Apple Inc. (AAPL), Fossil Inc (FOSL): If This Is The “Next Big Thing”, I’m Not Sold On The Idea

The bottom line is that if Apple Inc. (NASDAQ:AAPL) enters this market, the company might be best served to buy an existing watch company and learn the mechanics of the industry first. In fact, I would make the argument that if Apple wants growth from the watch industry, Michael Kors would be money well spent. Analysts are calling for over 32% EPS growth at Michael Kors, versus 18.98% growth at Apple. Michael Kors already has higher margins than Apple, and though the stock isn’t cheap at about 30 times forward earnings, higher margins and much faster growth might be worth the risk.

If you are looking for a play on the watch industry, Michael Kors seems to be the way to go. Fossil Inc (NASDAQ:FOSL) isn’t a bad pick either, at about 15.6 times projected earnings, and EPS growth of 16.6% is expected in the next few years. However, if you are buying Apple Inc. (NASDAQ:AAPL), buy the stock because it pays an over 2.2% yield, has $137 billion in cash and investments, generates significant free cash flow, and sells for a P/E of just over 10.5. I’m iWatching the product development cycle carefully, but I’m not sold that the iWatch is the “next big thing” investors are waiting for.

The article If This Is The “Next Big Thing”, I’m Not Sold On The Idea originally appeared on Fool.com and is written by Chad Henage.

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