Is True Religion Apparel, Inc. (TRLG) Getting A Fair Price?

VF paid a higher valuation for Timberland

VF Corp (NYSE:VFC) is the biggest company among the three. It is trading at $185 per share, with a total market cap of $20.2 billion. It also has the highest EV multiple at 12.25 EV/EBITDA. VF Corporation has been growing itself from smart acquisitions under the leadership of Chairman and CEO, Eric Wiseman. For example, dated back to the middle of 2011, VF Corp (NYSE:VFC) agreed to acquire Timberland for around $2 billion to expand its outdoor clothing offerings for consumers. The company was quite confident to improving Timberland’s business performance, primarily via synergy and cost cutting, so that Timberland’s operating margin could reach 15%, equivalent to the rest of the other brands in VF.

In the first quarter 2013, Timberland brand revenue has grown with the company’s expectation, at the rate of 2%, including the mid-teen growth in Asia and mid single-digit growth in the Americas region. Its Outdoor & Action Sports, including Timberland, Vans, and North Face, experienced a 12% rise in operating income, with the operating margin of 16.4%. VF’s EPS came in at $2.41 per share, 26% higher than the EPS of $1.91 per share for the same period last year.

My Foolish take

Interestingly, the price that VF paid for Timberland placed the value of 9.3 times EV/EBITDA for Timberland, a valuation comparable to the one current for Columbia Sportswear, and much higher than True Religion Apparel, Inc. (NASDAQ:TRLG)’s deal. I personally think that, with the double-digit return on invested capital at 14.55%, True Religion would deserve a higher offering price.

The article Is True Religion Getting A Fair Price? originally appeared on Fool.com and is written by Anh Hoang.

Anh HOANG has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Anh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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