BIRKENSTOCK HOLDING PLC (NYSE:BIRK): A Prime Example of Affordable Growth

Investors looking for expansion possibilities in the stock market often encounter a problem: high-expansion companies commonly trade at high prices, while stocks with fair prices may not show lively progress. A method to address this is the search for "Affordable Growth" or Growth at a Reasonable Price (GARP). This method tries to find companies that are not only showing good and lasting expansion but are also priced at levels that do not completely account for that future possibility. By using filters for good growth, acceptable basic profit, stable financial condition, and a fair price, investors can search for options that provide a balanced risk-reward setup.

BIRKENSTOCK HOLDING PLC (NYSE:BIRK) recently appeared from such a careful search process. The famous footwear and lifestyle brand, recognized for its special footbed, offers an interesting example for this investment method.

A Base of Good Expansion

The central idea of any expansion plan is, expectedly, expansion. BIRKENSTOCK does well in this group, getting a high ChartMill Growth Rating of 8 out of 10. The company's latest financial results highlight this ability, with notable increases in important measures.

• Strong Earnings Expansion: Over the last year, the company's Earnings Per Share (EPS) rose by a notable 45.31%. This is not a single event, as the average yearly EPS increase over recent years is a very good 28.17%.
• Good Revenue Growth: Top-line growth has been similarly good. Revenue grew by 16.22% in the past year, and the company has shown a good multi-year history with average yearly revenue growth of 23.57%.
• Lasting Future View: Importantly for a GARP plan, this expansion is predicted to persist, though at a more controlled but still acceptable speed. Experts forecast average yearly EPS growth of 13.32% and revenue growth of 13.84% in the next years. This future-focused expansion is necessary, as the "affordable" part of the price is supported by a stream of future earnings.

Price: Fair Considering the Path

A stock with excellent expansion can still be a bad investment if bought at a too high price. The Affordable Growth search specifically looks for stocks that are "not overpriced," and BIRKENSTOCK's ChartMill Valuation Rating of 5 indicates it is in a fair area, particularly when viewed next to its expansion outline.

• Relative and Absolute Price: The company's Price-to-Earnings (P/E) ratio of 18.68 is viewed as less expensive than 64% of similar companies in the Textiles, Apparel & Luxury Goods industry. More widely, it trades below the current S&P 500 average P/E of 26.51.
• Future-Focused Measures Are Important: The more applicable Price-to-Forward Earnings ratio of 16.70 also shows a price that is a bit less expensive than the wider market average. This future multiple, paired with the double-digit earnings expansion forecast, helps support the current price.
• Expansion Adjustment: The PEG ratio, which changes the P/E ratio for expected expansion, shows a proper price for BIRKENSTOCK. This is a vital test for GARP investors, as it directly connects the price paid to the expansion rate expected.

Supporting Basics: Profit and Condition

For expansion to be lasting and the price to be safe, a company must be profitable and financially stable. BIRKENSTOCK's scores in these areas give the needed base.

Profit is a clear ability, with a rating of 7. The company has very good margins that are both high and increasing.

• An Operating Margin of 26.38% is better than 100% of its industry peers.
• A good Profit Margin of 16.61% is higher than almost 98% of the industry.
• Returns on Assets, Equity, and Invested Capital are all firmly in the better half of the sector.

Financial Condition gets a medium rating of 5. The review shows a varied image with clear abilities and one clear point to watch.

• Abilities: The company has an acceptable cash position with a good Current Ratio of 2.81, and it keeps a sensible Debt-to-Equity ratio of 0.46.
• Point to Watch: An item of note is that the company's Return on Invested Capital (ROIC) is currently below its estimated Cost of Capital (WACC). This means that, for now, the company is not generating economic value on its total invested capital, a measure that value-focused investors will want to watch for betterment next to the expansion.

Summary

BIRKENSTOCK HOLDING PLC shows the kind of company an Affordable Growth search aims to find. It displays good, well-rooted expansion in both earnings and revenue, backed by very good profit measures. While its price is not very low, it seems fair compared to both its industry and its own expansion path, a key need for the GARP idea. The financial condition score points to a generally stable balance sheet, though the ROIC/WACC situation is an area for investor notice. Combined, these items create an image of an expanding brand that the market may not be completely pricing on a future-focused basis.

For a complete look at all basic measures, you can see the full Fundamental Analysis Report for BIRKENSTOCK.

This review of BIRKENSTOCK came from a specific investment search. If you want to find other companies that match this outline of good expansion at a fair price, you can look at more outcomes using the Affordable Growth stock screener.

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Disclaimer: This article is for information only and is not financial advice, a suggestion, or an offer to buy or sell any securities. The review is based on data and a given method; investors should do their own complete research and think about their personal financial situation and risk comfort before making any investment choices.