Fossil Inc (FOSL), Movado Group, Inc (MOV), Michael Kors Holdings Ltd (KORS): What’s The Best Play?

Fossil Inc (NASDAQ:FOSL) has grown tremendously in the 29 years since its founding. Even over the past decade, the company’s revenues have more than tripled from $781 million to over $3 billion expected this year. What stood out to me when researching Fossil Inc (NASDAQ:FOSL) was the low valuation relative to the growth rate of the company, so I decided to investigate a little more and see if Fossil might be worth a look.

About Fossil

Fossil Inc (NASDAQ:FOSL) offers a variety of watches, sunglasses, and leather accessories. Fossil also makes custom products on behalf of various other companies and organizations through licensing agreements, such as the University of South Carolina Fossil watch that’s on my wrist as I write this. On that note, watches provide the majority of the company’s income (72%), with the rest coming from other accessories. Licensed merchandise (like my watch) made up 45% of the company’s sales last year.

Fossil’s products are mainly sold through department stores and specialty retailers, although the company does have a chain of Fossil-branded stores, and sells through several e-commerce websites.

Growth Strategy and Valuation

Still growing its footprint at a rapid pace, Fossil Inc (NASDAQ:FOSL) plans to open over 70 stores this year, with a good portion of these in international markets. The company’s strategy is to offer the most up-to-date products in regards to fashion trends, and to tailor their product offerings to each geographical region.

Fossil Inc (NASDAQ:FOSL)’s sales have increased at an average annual rate of 16.2% since 2006, which is even more impressive when you consider that this includes the financial crisis years. Also very impressive is that while increasing the sales so quickly, Fossil managed to raise its profit margins from 10.2% to 18.4% in that same time period.

Despite all of this impressive growth, Fossil trades at a relatively modest valuation of 16.9 times TTM earnings. Not only does the consensus call for 15% annual earnings growth going forward, but Fossil also has a very impressive balance sheet, which features about $300 million in cash and almost no debt.

Alternatives

Alterative investments to Fossil Inc (NASDAQ:FOSL) include other fashion timepiece makers such as Movado Group, Inc (NYSE:MOV) on the smaller side, and Michael Kors Holdings Ltd (NYSE:KORS) on the larger end.

One of the most well-known watchmakers in the marketplace, Movado Group, Inc (NYSE:MOV) manufactures watches under a variety of brand names including Movado, Ebel, Coach, Hugo Boss, Tommy Hilfiger, Lacoste, and others. Movado shareholders have done very well over the past several years, with shares up from a low of $4.65 after the financial crisis when anything related to luxury spending was considered poisonous, to the $30 range currently.