Should Investors Pay a Premium for the Clothing Retailer?
The clothes retailer’s stocks Ralph Lauren Corp (NYSE: RL) is down 2.8%, trading at $ 132.78 this afternoon. Despite today’s negative performance, the security will be included in its fourth quarter earnings report, 92.2% year-on-year, which will be released ahead of the opening tomorrow, May 20th. Below, we’ll take a closer look at how equity has moved up the charts lately and examine how stocks have typically behaved after earnings.
The Ralph Lauren stock, which digs deeper, is fresh from a three-year high, May 10, of $ 142.06. The 60-day moving average has been a steady source of support for the stock since mid-November, while the $ 128 area earlier this month contained some of the stock’s recent pullbacks.
A look at the history of RL reactions after winning over the past two years reveals a generally negative reaction. During the last eight reports, five of those next day sessions were lower, including a 5% decrease in October. Equity has seen an average post-earnings swing of 5.5% over the past eight quarters, regardless of direction. This time the options market expects a much larger move of 9%.
Security isn’t the most consistent or top rated right now. While the RL 20.08 price / earnings ratio is reasonable by today’s standards, the company has struggled to demonstrate sales growth in recent years. For example, revenue fell 2.5% in fiscal 2020, leading to a Covid-19 pandemic and subsequent lockdowns. As the company prepares to release its fiscal 2021 financial results, it is almost inevitable that Ralph Lauren will see another year of declining sales.
The company’s trailing 12-month revenue is down 29% compared to fiscal 2020 and could continue to decline. The bottom line isn’t better either – the retailer’s net income after 12 months is $ 296 million, down $ 680 million from fiscal 2020. Overall, the Ralph Lauren share currently does not offer a good valuation opportunity, despite sales and net income heading towards prepandemic.