Are the Games Over?

I like Fossil (FOSL) stock. Ten years ago it was $12 and now today its $93. But 2012 was a tough year for shares of FOSL. The company lowered estimates three times during the year, and then beat those lowered estimates. This maneuver showed up good on the stat sheet, but those of us who cover the stock more closely know the truth (it wasn’t really a beat).

One Year Chart

Here’s FOSL’s one-year chart. The big drop in May came after the company beat by a penny and then lowered estimates for next quarter. Analysts lowered the number by 13 cents. Then when the quarter passed FOSL beat the street by 13 cents. When that happened the stock popped on the news (from around $70 to around $90). That’s not cool to lower then beat. And the stock took it on the chin overall due to lowered certainty. 

This quarter the chart shows some red, but an attractive P/E of 15. Looking at FOSL’s profit history (right side of the chart) the stock should be worth 18 times earnings.

Right now I like FOSL because it didn’t lower estimates when it reported last quarter’s earnings. The company could beat and put out 20% plus growth this quarter. I should be buying but this chart shows risk.

Fair Value

Fossel has a 2013 Fair Value of $110. the stock would be a good one to buy if it dipped to the mid-$80s. That would put it around 14 times earnings.

Sharek’s Take

I like shares of Fossil even though management played games with earnings estimates last year. This stock swings back-and-forth and doesn’t have the security some of my other stocks do. I feel FOSL is a good investment in the mid-$80s, but I don’t think it will get there. Instead FOSL is more likely to beat the street and pop on the news. Place your bets now if you wish, I’ll wait.