Movado Group, Inc (NYSE:MOV)
Movado Group, Inc (NYSE:MOV) designs and sells fine watches. It sells watches under the Movado, Coach, Concord, Ebel, ESQ, Scuderia Ferrari, Hugo Boss, Juicy Couture, Lacoste, Movado, and Tommy Hilfiger brands.
Though it’s struggled in the U.S. recently, Coach will always be a classic when it comes to handbags and other leather goods, in my opinion. Overall, however, Movado Group, Inc (NYSE:MOV)’s lineup is No. 3 among this group.
“Time” for the numbers
| Company | Trailing P/E | Fwd P/E | 5-Yr PEG | 3-Yr Avg Rev Growth (%) | 3-Yr Avg EPS Growth (%) | Net Margin (ttm) (%) | ROE (ttm) ($) | Debt/Equity (mrq) |
|---|---|---|---|---|---|---|---|---|
| Fossil | 18.2 | 15.2 | 1.2 | 22.7 | 39.3 | 12.1 | 30.9 | .1 |
| Swatch | 17.4 | — | — | 14.9 | 27.6 | 20.5 | 18.5 | 0* |
| Movado | 15.8 | 15.7 | 1.6 | 10.1 | N/A | 11.5 | 14.5 | 0 |
| Advantage | Fossil | Fossil | Fossil | Swatch | Fossil |
Sources: Yahoo! Finance & Morningstar; * close to nil. Data to July 5.
Fossil is the stand-out. Its nearly 31% ROE is outstanding. ROE is a measure of how efficiently a company uses investors’ money to generate profit. Over the 5-year period to July 5, for instance, Fossil’s stock returned 285% to Movado’s 89% and the S&P 500’s 29% (Swatch has only traded for three years) .
Its 12% margin is solid for this line of business. It’s just that Swatch’s margin is unusually high.
Analysts estimate Fossil Group Inc (NASDAQ:FOSL)’s EPS will increase 21.3% this year, 13.7% next year, and an average of 15% over five years. Swatch’s EPS is expected to increase about 2,200% this year — but that’s due to the Harry Winston brand acquisition. Its 2014 and 5-year EPS growth is estimated at 11% and 1.1%, respectively.
Movado’s EPS is estimated to increase 75%, 25%, and 12%, respectively, this year, next year, and over five years. This year and next year are high because Movado had negative EPS in 2010 and 2011 and is back on track. Its five year number is lower than Fossil’s.
While one quarter is just one quarter, it’s still a negative that Movado’s revenue increased just 6% in its most recent quarter. Granted, EPS increased 23%, but there’s only so far margin expansion can take a company. Fossil’s revenue and EPS rose 15.5% and 30.1%, respectively, in its most recent quarter.
Takeaway
Fossil appears a moderately attractive holding for long-term investors. The company has an exceptional ROE and management known for its acquisition prowess, plus it regularly beats analysts’ estimates.
However, the success of smart watches, particularly Apple Inc. (NASDAQ:AAPL)‘s rumored in-the-works iWatch should be monitored. Smart watches could cut into some traditional watch sales.
The article The Wristwatch: Reports of My Death Are Greatly Exaggerated! originally appeared on Fool.com and is written by BA McKenna.
BA McKenna has no position in any stocks mentioned. The Motley Fool recommends Fossil. The Motley Fool owns shares of Fossil and Movado Group (NYSE:MOV). BA is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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