Ralph Lauren Corp (RL): Should I Invest?

Ralph Lauren stock is going nowhere
Granted, there’s still the old investing truism that investing isn’t about what a stock has done in the past, but what it might do in the future. In that regard, there may be some validity to investors paying higher P/E and P/FCF ratios for Ralph Lauren stock than they shell out for shares of PVH or VF Corp (NYSE:VFC). After all, analysts do expect to see Ralph grow its profits a bit faster than the competition over the next five years:

Yet, even after looking at this last chart, a couple questions spring to mind. For example, what’s the basis for analysts thinking that Ralph Lauren will produce faster earnings growth than — for example — PVH produces? After all, PVH is the company growing sales faster. That would seem to indicate that PVH’s products are the more popular, and that PVH — not Ralph Lauren — is the company more likely to marry high profit margins with high sales growth to produce pricing power … and strong earnings growth.

Even if the analysts are right, and even if Ralph Lauren Corp (NYSE:RL) does grow as it’s predicted to, does it really make sense to pay 24 times earnings, and 31 times free cash flow, to own a share of Ralph Lauren stock? Does it make sense to do this when even in the best case, Ralph will only produce respectable, but hardly extraordinary, low-to-mid-teens profit growth?

I don’t think it does make sense. Overpriced and underperforming, I think Ralph Lauren stock is likely to keep on going nowhere.

The article Ralph Lauren Stock Is Going Nowhere — Here’s Why originally appeared on Fool.com and is written by Rich Smith.

Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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