The firm said it lowered its rating for the designer apparel company due to concerns over Ralph Lauren's earnings growth.
"Accelerated SG&A [spending] will persist longer than we had previously expected, and margin expansion will be delayed into FY'16 or even FY'17, suggesting sub-10% earnings growth for three years-running," Credit Suisse said.
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"We expect the multiple to remain under pressure for the next 12-months and we now view this as a long range stock following 18-months of relative underperformance," the firm added.
Separately, TheStreet Ratings team rates RALPH LAUREN CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate RALPH LAUREN CORP (RL) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- RALPH LAUREN CORP has improved earnings per share by 11.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, RALPH LAUREN CORP increased its bottom line by earning $8.00 versus $7.13 in the prior year. This year, the market expects an improvement in earnings ($8.39 versus $8.00).
- The net income growth from the same quarter one year ago has significantly exceeded that of the Textiles, Apparel & Luxury Goods industry average, but is less than that of the S&P 500. The net income increased by 9.9% when compared to the same quarter one year prior, going from $215.70 million to $237.00 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 15.4%. Since the same quarter one year prior, revenues slightly increased by 9.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- RL's debt-to-equity ratio is very low at 0.14 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, RL has a quick ratio of 1.97, which demonstrates the ability of the company to cover short-term liquidity needs.
- You can view the full analysis from the report here: RL Ratings Report