NEW YORK (TheStreet) -- Shares of Ralph Lauren (RL) are rising by 2.85% to $131.92 in mid-morning trading, after analysts at Goldman Sachs upgraded the company to "buy" from "neutral" and raised their price target to $154 from $138.
Analysts said that they expect margin beats to drive a multiple re-rating towards historical levels.
"US apparel has been tough, but we think RL is better positioned with an estimated 70% of its business in Men's, Kids, Home and Accessories away from the Women's category, which has been troubled," analysts said.
Going forward, e-commerce should be a powerful driver of market share gains and capture more of the downstream retailer margin, analysts highlighted.
Ralph Lauren is an American clothing brand headquartered in New York City.
TheStreet Ratings team rates RALPH LAUREN CORP as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate RALPH LAUREN CORP (RL) a HOLD. The primary factors that have impacted our rating are mixed, some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- RL's revenue growth trails the industry average of 11.0%. Since the same quarter one year prior, revenues slightly increased by 1.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- RL's debt-to-equity ratio is very low at 0.20 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 1.66, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for RALPH LAUREN CORP is rather high; currently it is at 55.38%. Regardless of RL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 6.57% trails the industry average.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Textiles, Apparel & Luxury Goods industry average. The net income has decreased by 18.9% when compared to the same quarter one year ago, dropping from $153.00 million to $124.00 million.
- Net operating cash flow has significantly decreased to $4.00 million or 97.27% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full analysis from the report here: RL Ratings Report