One-glance verdict
Undervalued
$36.03 our estimate vs market $14.74
Wall Street consensus: $16.08 (-55.4% lower than our fair-value estimate)
59% below our estimate, below the bear case
Fundamentals snapshot
Burberry Group plc
BURBY · PNK · Consumer Cyclical · Luxury Goods
Current price
$14.74
52-week range
$13.13 - $18.55
Market cap
$5.28B
Balance sheet
Stretched
1.95x Concerning
Net debt $1.13B. Interest coverage shows how many times profit covers the interest bill.
What stands out
1 Reward
3 Risks
1 rewards · 3 risks
- Reward Free cash flow was positive in 4/10 years.
- Risk Stock trades 87.0% above its 5-year average P/E.
- Risk Net debt grew 85.2% over 3 years.
- Risk Operating margin compressed from 20.5% to 6.6% over 3 years.
What this company does
Burberry Group plc
Burberry is a fancy clothing and accessory company that sells everything from handbags and scarves to coats and dresses. Most of its money comes from selling these luxury items directly to customers in its own stores and online, as well as through other retailers. This is important because when a company sells a lot of its own branded items, it has more control over its pricing and can keep a bigger piece of each sale, which often leads to better profit margins (the percentage of money left over after paying the costs of making and selling the product).
How the company got here
Burberry was founded in 1856 by Thomas Burberry, who wanted to create clothing that could protect people from the unpredictable British weather. He invented a durable, water-resistant fabric called gabardine, which became the foundation for the brand's iconic outerwear, especially the trench coat, which was originally designed for military use. Over the decades, Burberry evolved from an outdoor apparel company to a global luxury fashion house, known for its distinctive check pattern and British heritage. The company went public on the London Stock Exchange in 2002 and has since focused on strengthening its brand identity and expanding its global presence in the luxury market.
What it actually does
Burberry designs, manufactures, and sells luxury fashion items. Their product range includes ready-to-wear clothing for women, men, and children, as well as accessories like handbags, scarves, footwear, and small leather goods. They are particularly famous for their trench coats and their signature check pattern, which is often used as a lining or a design element in their products. Burberry sells these items through its own stores, online, and through select wholesale partners.
Retail/Wholesale
This is Burberry's main business, where it sells its luxury goods directly to customers. This includes sales from Burberry's own stores, both physical locations and its online shop (digital commerce). It also encompasses sales through concessions (shops within larger department stores), outlets, and to wholesale partners like department stores and multi-brand retailers. This segment is the largest part of Burberry's business, giving the company direct control over how its products are presented and sold to consumers.
Licensing
Through its licensing segment, Burberry allows other companies to manufacture and distribute products using the Burberry brand name and trademarks. This is a smaller part of Burberry's overall business compared to retail and wholesale. It's a way for Burberry to extend its brand reach into different product categories or markets without directly managing all aspects of production and distribution, generating revenue through royalty fees.
What management is betting on now
Burberry's current strategy, known as 'Burberry Forward,' focuses on reigniting brand desire and improving performance to create long-term value. Management is emphasizing 'Timeless British Luxury,' blending heritage with modern design to appeal to a broad range of luxury customers. A key priority is to 'Lead with outerwear,' reinforcing their authority in this category by aligning pricing with its premium status and celebrating iconic brand elements. They are also working to align distribution with their product and customer strategy, aiming to increase store productivity and optimize their presence in both wholesale and outlet channels.
Price history
How the share price has moved
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Is it cheap or expensive?
Fair value $36.03 vs current price $14.74
Wall Street consensus is the average analyst price target: $16.08 (-55.4% lower than our fair-value estimate).
Our most-likely fair value is $36.03 a share — about 144.4% above today's price of $14.74, so the stock currently looks cheap (undervalued).
Is it drowning in debt?
Stretched
Net debt $1.1B. Interest coverage 2.0x.
Net debt
$1.13B
Interest coverage
1.95x
Burberry Group plc's profit covers its interest bill about 2.0 times over. which is weaker than most peers shown here.
Stretched
Worse cushion
Baseline
Better cushion
BURBY
BASELINE
Burberry Group plc
Total debt $2.02B Interest coverage 1.95x This is the baseline the peer rows are being compared against.
Total debt $41.22B Interest coverage 15.35x +687% vs BURBY Carries about 7.9x more debt cushion than BURBY.
Total debt $4.25B Interest coverage 34.68x +1,677% vs BURBY Carries about 17.8x more debt cushion than BURBY.
What you should know
The case for and against BURBY
1 Reward
3 Risks
Rewards
-
Free cash flow was positive in 4/10 years.
Risks
-
Stock trades 87.0% above its 5-year average P/E.
-
Net debt grew 85.2% over 3 years.
-
Operating margin compressed from 20.5% to 6.6% over 3 years.
The numbers
All the key metrics, grouped by purpose
Tap any ? icon to learn what it means.
Valuation
How expensive the stock looks
P/E (TTM)
184.25x
Forward P/E
20.61x
P/B
4.19x
P/S
2.18x
EV/EBITDA
22.78x
PEG ratio
0.42x
Profitability
How much profit each dollar creates
Gross margin
67.9%
Operating margin
6.6%
Net margin
0.9%
ROE
2.1%
ROA
3.1%
Health
Liquidity and balance-sheet strength
Debt / equity
1.61x
Current ratio
1.87x
Quick ratio
1.31x
Total debt
$2.02B
Total cash
$890.88M
Growth
How the business has been compounding
Revenue TTM
$3.21B
Revenue 5Y CAGR
-7.9%
EPS TTM
0.08
EPS 5Y CAGR
-64.0%
Cash flow
How much cash the business throws off
Operating CF TTM
$642.60M
Free CF TTM
$491.24M
FCF margin
15.3%
Dividend
Shareholder payout
Yield
0.0%
Payout ratio
0.0%
Last ex-div date
2024-06-28