Fossil (FOSL) popped after reporting earnings this month. I like Fossil — both the stock and the clothes — but need to see more before committing to purchase the stock.
One Year Chart
This stock was a good buy at $80. I say that now only because its $120. Back when the stock was $80 at the beginning of the year, the P/E was 14. Now its 21.
2012 earnings estimates just fell -yes fell — from $5.54 last quarter to $5.49 now. So the outlook’s gotten worse yet the P/E’s risen from 14 to 21.
Looking at the Estimates, profit growth is expected to be 7% next quarter and 15% the quarter after. Not really a hyper growth story.
Fair Value
Look, I don’t want to spend too much time on this because the stock seems fully valued here.
Bottom Line
The bottom line here is the P/E went from 14 to 21. When I look at 2014 earnings estimates — yes 2014 — the company is expected to make exactly $8.00. A 15 P/E on $8 in earnings would get a price of $120. Yes, the stock could be $120 two years from now.
FOSL is a good stock. I don’t like the fact there were two bad quarters last year. Now at 21 times earnings the stock’s got to give me (A) solid profit growth or (B) an increase in annual profit estimates before I look to buy. Look at the Earnings Table and you can see neither is happening in the short term
