Ralph Lauren (RL) laps the stock market: Here’s why

In the latest close session, Ralph Lauren (RL – Free Report) was up +1.3% at $369.81. The stock exceeded the S&P 500, which registered a gain of 0.65% for the day. At the same time, the Dow added 0.48%, and the tech-heavy Nasdaq gained 0.82%.

Heading into today, shares of the upscale clothing company had lost 0.69% over the past month, lagging the Consumer Discretionary sector’s gain of 2.38% and the S&P 500’s gain of 1.15%.

The investment community will be paying close attention to the earnings performance of Ralph Lauren in its upcoming release. The company’s upcoming EPS is projected at $5.72, signifying a 18.67% increase compared to the same quarter of the previous year. In the meantime, our current consensus estimate forecasts the revenue to be $2.3 billion, indicating a 7.27% growth compared to the corresponding quarter of the prior year.

In terms of the entire fiscal year, the Zacks Consensus Estimates predict earnings of $15.29 per share and a revenue of $7.75 billion, indicating changes of +24.01% and +9.54%, respectively, from the former year.

Additionally, investors should keep an eye on any recent revisions to analyst forecasts for Ralph Lauren. Recent revisions tend to reflect the latest near-term business trends. As a result, upbeat changes in estimates indicate analysts’ favorable outlook on the business health and profitability.

Our research shows that these estimate changes are directly correlated with near-term stock prices. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.

The Zacks Rank system, spanning from #1 (Strong Buy) to #5 (Strong Sell), boasts an impressive track record of outperformance, audited externally, with #1 ranked stocks yielding an average annual return of +25% since 1988. Over the past month, the Zacks Consensus EPS estimate has remained steady. Ralph Lauren is currently a Zacks Rank #3 (Hold).

With respect to valuation, Ralph Lauren is currently being traded at a Forward P/E ratio of 23.88. For comparison, its industry has an average Forward P/E of 16.49, which means Ralph Lauren is trading at a premium to the group.

Investors should also note that RL has a PEG ratio of 1.78 right now. The PEG ratio is akin to the commonly utilized P/E ratio, but this measure also incorporates the company’s anticipated earnings growth rate. Textile – Apparel stocks are, on average, holding a PEG ratio of 2.99 based on yesterday’s closing prices.

The Textile – Apparel industry is part of the Consumer Discretionary sector. This industry, currently bearing a Zacks Industry Rank of 62, finds itself in the top 26% echelons of all 250+ industries.

The strength of our individual industry groups is measured by the Zacks Industry Rank, which is calculated based on the average Zacks Rank of the individual stocks within these groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.