Are Investors Sacrificing Quality for a Discount on PVH Stock?

Assessing the risks associated with investing in Calvin Klein’s parent company

Feb 10, 2022 at 11:06 AM
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PVH Corp (NYSE:PVH) is up 1.1% to trade at $104.17 at last check, after the parent of Tommy Hilfiger and Calvin Klein yesterday appointed Zac Coughlin as its chief financial officer. The apparel retailer has had a volatile last few months on the charts, but shares are now pacing for their first close above the 60-day moving average in more than one month, after bouncing off a Jan. 28, nearly annual low of $89.54. Over the past three months, PVH has shed 13.9%.

PVH 60 Day

Options traders lean bullish. This is per PVH's 50-day call/put volume ratio of 3.97 over at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which stands higher than 97% of readings in its annual range. This means long calls have been picked up at a quicker-than-usual pace in the past 10 weeks.

The security sports attractively priced premiums, too. The stock's Schaeffer's Volatility Index (SVI) of 40% ranks higher than just 12% of reading from the last 12 months. This means options players are pricing in relatively low volatility expectations for PVH right now.

From a fundamental point of view, the apparel stock stock has an attractive valuation, with a price-earnings ratio of 14.99, and a price-sales ratio of 0.78. PVH also sports a forward price-earnings ratio of 9.29. However, the company has a history of failing to produce consistent top- and bottom- line growth.

Although PVH's trailing 12-month revenues have increased 24% since 2021, the company's revenues are still down 11% since 2020. Additionally, PVH's net income decreased roughly $1.88 billion between 2019 and 2021. Nonetheless, PVH has partly recovered on the bottom-line, leaving its trailing 12-month net income at a 33% decline since 2019.

Furthermore, the apparel names hold a weak balance sheet with $1.3 billion in cash and $5.4 billion in total debt, making PVH stock a fairly risky value option, despite its strong valuation.

 

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