It’s hard to find luxury at a bargain, even more so in a QE environment, but perhaps Switzerland’s Richemont is showing early signs of sector-relative value in a sector that already seems too expensive…
- Sector-relative valuation flagging as inexpensive; historically this has offered a good inflexion point in subsequent price action
- EPS downward revisions have been getting less and less negative over the previous 3 months; price now falling back in line with the longer-term earnings trend
- Dividend looking attractive vs. where the yield usually lies relative to the sector (also decent in absolute terms at 2%)
- Signals are supportive, with two technical signals having fired recently, both with over 67% historic reliability
Looking at the trend in 12m fwd EPS since 2010, the stock price tends to trade around its earnings estimates. Stock is currently a consensus buy at a 11% discount to consensus analyst price targets.
Observe the subsequent price action every time the sector-relative P/E has touched its lower bounds.
Stock is looking oversold on all Stochastic measures.
Two reliable technical signals have fired recently, a Fast Stochastic (2.8% average return over 20 trading days, 68% reliability) and a Bollinger Band (4.0% average return over 20 trading days, 68% reliability).
At 77% the put ratio is at its statistical highs, indicating people still want downside protection.
Looks like out-the-money calls are cheap at the moment, which is interesting if you don’t want to own the stock outright.