How High can Fifth & Pacific Companies Inc (FNP) Go? – Coach, Inc. (COH), Michael Kors Holdings Ltd (KORS)

For comparative purposes on current year sales, Michael Kors Holdings Ltd (NYSE:KORS) trades at over 5 times estimates while Coach trades at nearly 2.7 times sales expectations. Coach, Inc. (NYSE:COH) is now a behemoth with a market valuation of over $14 billion and expected to report yearly revenue of $5.1 billion on only 7% growth. If it can trade at 2.7 times sales with only 7% growth, than Fifth & Pacific deserves at least an equal multiple.

If kate spade alone achieved a Michael Kors Holdings Ltd (NYSE:KORS) type valuation, it would be worth $3 billion. If the whole company achieved a Coach, Inc. (NYSE:COH) type valuation, it would be worth $4.6 billion. By these metrics, the stock has plenty of growth if it can continue to turnaround the weak brands.

Stock performance

The stock performance over the last year had been very flat after nearly doubling in Q1 last year. With the recent surge after breaking above the $14 range at the end of 2012, could the pattern be setting up for a repeat peak during Q1? The stock has already soared from near $12 in the last week of December to $19 now.

18 Month Chart – Fifth & Pacific Companies

Bottom line

The current valuation can easily be attributed to kate spade results only. The brand has plenty of potential for morphing into a major brand. Any further gains by the other brands or outright sells for solid numbers would propel the Fifth & Pacific stock much higher. The three brands combine for a revenue base of over $1.5 billion suggesting a collective valuation multiple around a meager 1 times sales.

Investors can’t be blamed for taking profits after the recent gains. While comparative analysis suggests the stock has more room to run, nothing is guaranteed in the market and investors should protect themselves if the stock is again peaking during Q1.

The article How High can Fifth & Pacific Go? originally appeared on Fool.com and is written by Mark Holder.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.