Hey guys, with this article I want to start a new category where I want to find out whether a stock is fairly priced according to its 5 year average or not. Moreover it should help me if and when I can consider this stock as an investment. The idea to publish my thoughts about stocks is that I want to improve my stock analysis through your feedback. As you all know I am still not such an experienced investors :).
The analysis of the price contains the following points
- Price Sales
- Dividend Yield
Furthermore, I will include the EPS growth of the past 5 years and the expected growth for the upcoming 5 years. Another important point is of course the debt to equity ratio.
Being a dividend investor, I also judge the stock by its dividend history, free cashflow per share and as well the payout ratio.
The first stock I am going to analyze is VF Corporation, recently a very much loved stock in the blogger community.
V.F. Corporation (VFC) designs and manufactures, from independent contractors, various apparel and footwear products. V.F. Corporation operates primarily in the United States and Europe. The product portfolio includes many large brands like Timberland, The North Face, JanSport, Eastpak, MLB, NFL, and Harley-Davidson brands. V.F. Corporation was founded in 1899 and is headquartered in Greensboro, North Carolina
Currently VFC is priced at 51.85 USD
If I take the average of the 4 Ratio according to the % year average the price would be at 62.92 USD. So, the current price is about 17.6 % below its 5-year average. The 5-year high was at 77.39 USD about 2 years ago, so the stock currently trades below 33% below its all-time high.
Earnings per Share growth
In 2011 the EPS were 2.00 USD and expected EPS in 2016 will be around 3.09 USD. This means EPS grew on average by 9.1%. Nevertheless, we should also consider that in 2014 EPS dropped to 2.38 USD from 2.71 USD in the previous year. For the next 5 years it is estimated to have a growth of 11.1%.
Dividend History and Future
VFC Corporation has a strong dividend history with increasing the dividend for 44 years in a row. In the last 5 years, the average growth per year is 17.9% based on a dividend of 0.65 USD in 2011 and a current one of 1.48 USD. The payout ratio with 47.8% will be still on reasonable level.
An important point for my buying decision is as well the dividend yield on cost, which is currently at 3.24% based on the new quarterly dividend of 0.42 USD. After tax my minimum yield I want to reach within the next 3 years should be at 2.8%, this means it should have a yield of 3.9% before tax. Assuming a conservative dividend growth of 7.5% per year the dividend in in 2020 will be at 2.09 USD, which means a yield on costs of 4.03% before tax.
All in all VFC is a buy especially when looking at the current chart and its strong fundamentals, the debt to equity ratio is 0.5. One of the weaker points is the free cashflow per share which was in 2015 at 1.60 USD. But considering the growth perspective for the upcoming years I currently see a very good entry point.
What do you think about this sock valuation? Are there things which I could do better? What are your buying decisions based on?
Disclosure: I do not recommend any decision to the reader or any user, please consult your own research. Thank you for your understanding.