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 (NYSE: 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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