Should You Buy Fifth & Pacific Companies Inc (FNP)?

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Coach, Inc. (NYSE:COH) looks pretty cheap at its current trading price. At $57 per share, Coach is worth nearly $15.9 billion on the market. The market values Coach at around 8 times EV/EBITDA. Michael Kors Holdings Ltd (NYSE:KORS) has a higher valuation than Coach, Inc. (NYSE:COH). Michael Kors is trading around $55 per share, with a total market cap of $10.9 billion. The market values Michael Kors Holdings Ltd (NYSE:KORS) at as much as 17 times EV/EBITDA.

What worries me is Fifth & Pacific Companies Inc (NYSE:FNP)’s balance sheet. As of December 2012, the company had negative equity of $127 million, $59 million in cash, and as much as $400 million in debt. Both Coach, Inc. (NYSE:COH) and Michael Kors Holdings Ltd (NYSE:KORS) have very strong and liquid balance sheets, with lot of cash on hand and little leverage.

Among the three, Coach is the most profitable retailer with the highest return on invested capital at 52.56%. Michael Kors Holdings Ltd (NYSE:KORS) ranked second with 36.8%, while Fifth & Pacific Companies Inc (NYSE:FNP) has generated losses in the past twelve months.

My Foolish take

Fifth & Pacific Companies Inc (NYSE:FNP) does not interest me much due to its weak balance sheet. However, Fifth & Pacific is considered to be an opportunistic stock due to its brand restructuring. Among the three retailers, I like Coach, Inc. (NYSE:COH) the most because of its highest return on invested capital, a conservative capital structure, and a low valuation.

The article Should Investors Buy This Stock at Its Current Price? originally appeared on Fool.com.

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