PVH Corp (PVH): This Apparel Company Is Good, But There May Be Better Options

Although PVH Corp (NYSE:PVH) is not exactly a household name, many of its clothing brands are. As consumer spending has been steadily rising over the past several years, particularly on upscale items, PVH has seen its revenues climb tremendously. Add a few major acquisitions into the mix, and PVH Corp (NYSE:PVH) has grown over the past decade from a smaller apparel company with just over $1 billion in revenues to one of the industry leaders, expected to break $8 billion in sales this year. With shares currently at record highs, is there still an opportunity for gains here, or should investors in PVH take their profits and look elsewhere?

Who is PVH?

PVH Corp (NYSE:PVH) is an apparel company that operates under some of the most widely recognized brand names in the industry, such as Calvin Klein, Tommy Hilfiger, IZOD, Van Heusen, and several others. The company designs, manufactures, licenses, and distributes a variety of men’s and women’s apparel and accessories under these and other names.

A major component of PVH’s growth strategy has come through acquisitions, and the company has purchased several notable brands and companies, beginning with the purchase of Calvin Klein in 2003. Other notable acquisitions include Superba in 2007, Tommy Hilfiger in 2010 for $3 billion, and most recently the Warnaco Group in February for $2.9 billion, which brought the Calvin Klein brand name.

The Numbers Game

PVH trades for roughly 20.5 times TTM earnings, which seems a bit high at first. PVH Corp (NYSE:PVH) is projected to report earnings of $7.04 per share for the current fiscal year (2014), and are expected to grow their earnings to $8.21 and $9.48 in fiscal years 2015 and 2016 respectively. This corresponds to a three-year average annual earnings growth rate of just over 13%, which more than justifies the valuation, in my opinion. The company has a very good track record of earnings and revenue growth, and I think that PVH Corp (NYSE:PVH) will be able to deliver on the expectations, especially if the economy and consumer confidence continue to improve like they have been.

Other Ways to Play It

Alternatives to PVH include other major fashion brands, such as Ralph Lauren Corp (NYSE:RL), or a more specialized and rapidly growing company such as Coach, Inc. (NYSE:COH), so let’s take a quick look at those for comparative purposes.

At over 23 times TTM earnings, Ralph Lauren Corp (NYSE:RL) looks a bit expensive at the current levels. While they have the same 13% projected forward growth rate as PVH Corp (NYSE:PVH), their balance sheet looks much better, which is certainly worthy of consideration. As a result of its acquisitions, PVH has a significant amount of debt. Ralph Lauren Corp (NYSE:RL), on the contrary, has almost $1 billion in net cash (cash minus debts).