Argus: VF Corp. Shares Merit Higher Multiple, Hold 26% Upside Potential

Despite the generally cautious outlook on retailers, one Argus analyst is upbeat about apparel and footwear retailer VF Corp VFC.

The Analyst

Analyst Mike Jaffe initiated coverage of VF Corp.  shares with a Buy rating and $101 price target, suggesting roughly 26-percent upside.

The Thesis

VF Corp. is poised to grow its earnings solidly over the coming several years, Jaffe said in a Monday note. Strong demand exists for the retailer's Vans and North Face products, and the direct-to-consumer and international businesses are faring well, he said. 

Overseas sales account for more than 40 percent of the company's total revenues in fiscal 18, and the direct-to-consumer business — including e-commerce — comprised 32 percent of sales, Jaffe said.

Recently, the company reported Q1 results showing 22-percent revenue growth and forecast-beating earnings.

Argus estimates earnings of $3.60 per share in fiscal 2019 and sales of $13.6 billion, representing 14.7-percent and 9.7-percent year-over-year growth, respectively.

On a price-to-earnings basis, VF Corp. shares trade at a discount to the peer group, according to Argus. Given the company's above peer average growth prospects, Jaffe said the stock merits a higher multiple.

The Price Action

VF Corp. shares have gained about 8.9 percent year-to-date. 

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