Note: Tapestry’s FY’24 concluded on June 29, 2024.
Luxury fashion brand Tapestry (NYSE: TPR) has experienced a 27% increase year-to-date, significantly outperforming the S&P 500’s 2% return and surpassing peer Ralph Lauren’s (NYSE: RL) 15% growth. This momentum is driven by impressive Q3 earnings, exceptional results at Coach, and an upward adjustment to its full-year FY2025 forecast. The management has raised both revenue and EPS expectations, attributing it to improving gross margins and appeal to younger consumers. See Buy or Sell Tapestry Stock?
Despite this optimistic outlook, TPR stock appears fully valued and perhaps overvalued. Trading at approximately $83, it presents limited upside when considering the company’s mediocre long-term fundamentals and its susceptibility to downturns. Our evaluation—covering growth, profitability, financial stability, and resilience during downturns—provides a mixed perspective that ultimately renders TPR stock unappealing. However, if you are looking for upside with lower volatility compared to individual stocks, the Trefis High-Quality portfolio serves as an alternative—having outperformed the S&P 500 and yielding returns exceeding 91% since its inception.
Tapestry’s Valuation: Reasonable, But Not Persuasive
At first glance, Tapestry may seem modestly valued, boasting a price-to-sales ratio of 2.4, a price-to-free cash flow of 18.2, and a price-to-earnings of 21.7—all below the averages of the S&P 500. However, this discount reflects the company’s sluggish growth and merely average profitability rather than being a hidden opportunity.
Tapestry’s revenue has been notably unimpressive. Tapestry has recorded a three-year compound annual growth rate of only 1.0%, significantly lagging behind the S&P 500’s 5.5%. While revenue has increased by 2.7% over the past year to $6.9 billion and Q3 2025 showed an 8% year-over-year growth—outpacing the S&P’s 4.8%—the long-term outlook remains weak for a brand aiming for premium global stature.
Profitability metrics tell a comparable story. The 17.9% operating margin is reasonable, alongside its 12.5% net income margin that slightly surpasses the S&P’s 11.6%. Its 14.9% operating cash flow margin aligns with the benchmark. While these numbers are commendable and reflect a middle-of-the-road performance, they do not support a case for multiple expansion.
Financial Stability: Strong Balance Sheet
On a brighter note, Tapestry possesses a robust financial structure, with $4.1 billion in debt against a market capitalization of $17 billion—resulting in a manageable debt-to-equity ratio of 25.3% and a healthy 14.5% cash-to-assets ratio. This financial robustness allows the company to invest, return capital, or manage short-term challenges.
Downturn Resilience: A Major Concern
This is where Tapestry’s narrative takes a definite downturn: the stock has habitually underperformed the S&P 500 during significant downturns. It fell 46% during the 2022 inflation shock (compared to the index’s 25% drop), plummeted 64% in the 2020 COVID crash (versus 34%), and decreased 78% in the 2008 financial crisis (against 57%). While it eventually recovered each time, the significant declines emphasize a concerning level of volatility, particularly alarming in today’s unpredictable economic landscape. Our dashboard How Low Can Stocks Go During A Market Crash illustrates how key stocks performed during and after the last six market crashes.
Conclusion
In summary, Tapestry rates neutrally on growth and profitability, strongly on financial stability, but very weakly on downturn resilience, resulting in an overall uninspiring profile. Despite recent price gains and what appears to be a fair valuation, the stock’s unimpressive fundamentals and poor track record during previous market shocks render it a risky investment.
While it would be advisable to steer clear of TPR stock at this time, you might consider the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) while delivering strong returns for investors. What is the reason for this? The quarterly rebalanced mix of large-, mid-, and small-cap RV Portfolio stocks has offered a proactive means to capitalize on favorable market conditions while minimizing losses when markets decline, as detailed in RV Portfolio performance metrics.
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