Valuation Scorecard: Stock Rating D-Negative (6/24/24)-Movado Group Inc (MOV).

At the current price of $25, what is the market’s view of Movado Group’s future operating performance? To achieve average annual stock market performance of 9.0% over the next 6 years, Movado Group shares will need to reach $42. To achieve Upper quartile performance, Movado Group’s stock price will need to reach $50 by 2030.

Executive Summary

• Key Movado Group characteristics: above average financial strength, average profitability, instability, and very low expected growth. A big negative influence on Movado Group’s valuation is its poor Risk Profile.
• Very low valuation, average shareholder returns. Current valuation levels are very low relative to the Movado Group Peer Group. Recent market returns have tracked the Movado Group Peer Group. Total shareholder returns expected to equal the overall equity market. Based on current investor expectations, Movado Group shares should reach a level of $33 by 2030 — an 9.6% per year total shareholder return. A 2030 stock price of $42 would reflect median performance and a price of $50 would be required to reach upper quartile performance.
• Movado Group’s historical growth is very low. Historical growth has been very low relative to the Movado Group Peer Group and forecasted growth is relatively very low. EPS Growth, Asset Growth, and Revenue Growth have lagged. These factors have negatively affected market perceptions of Movado Group. Movado Group’s historical income statement growth and balance sheet growth have diverged. Revenue growth has paralleled asset growth; earnings growth has fallen short of equity growth driving erosion in return on equity.
• Profitability is very low. The company has high excess cash and will have to work to reinvest at attractive returns to support profitability and valuation.
• Risk Profile has been Movado Group’s biggest valuation weakness. Movado Group’s risk profile is very unfavorable. Overall variability has been above average with above average revenue variability, very high E.P.S. variability, and only average stock price volatility. Financial Strength is only average and earnings’ expectations are unavailable. The debt/capital ratio has declined.

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