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Former retailing high flyer Fossil (FOSL) was kneecapped in early May after missing revenue estimates and giving poor guidance due to its European operations. The company plunged some 40% in reaction to that news and has not been able to stage a rally since. However, I think the sell-off was overdone. Europe does represent a little over 25% of sales, but the company has a strong record of growing earnings and revenues even in the difficult economic environment of the past five years. Several insiders bought shares after the sell-off and the stock is offering compelling valuations for long term growth investors.

6 reasons FOSL is offering a good entry point at just over $68 a share:

  1. Three insiders purchased just under 10,000 shares in May at higher prices.
  2. The 11 analysts that cover the stock have a $90 median price target on FOSL, 30% higher than the current price of the stock.
  3. The stock is selling in the bottom of its five year valuation range based on P/E, P/S, and P/CF.
  4. The company has a solid balance sheet ($240mm in net cash) and the market seems to be discounting its growth prospects (Five year projected PEG of .67).
  5. The company has beaten earnings estimates for twelve straight quarters and is selling at a forward PE of just over 11, a discount to its five year average (16.4).
  6. The recent sell-off is giving investors a chance to buy a company that are grown earnings and revenues at a 26% and 13% average annual rate over the past five years at a bargain price.

The stock looks like it is trying to bottom here after that huge 40% sell-off in early May (see chart).


(Click to enlarge)

Source: Insiders And Analysts Do Not Believe This Former Retailing High Flyer Is A Dinosaur