KONTOOR BRANDS INC (NYSE:KTB) – A Potentially Undervalued Apparel Stock

KONTOOR BRANDS INC (NYSE:KTB) was identified by our Decent Value stock screener as a company with solid fundamentals and an attractive valuation. The apparel manufacturer, known for brands like Wrangler and Lee, shows strong profitability and financial health while trading at a reasonable price. Below, we examine why KTB may appeal to value investors.

Valuation

KTB’s valuation metrics suggest the stock may be priced below its intrinsic value:

• P/E Ratio: At 13.02, KTB trades below the industry average of 35.25 and the S&P 500’s 27.29.
• Forward P/E: The forward P/E of 11.02 is also lower than the sector average (17.67) and broader market (36.06).
• Price/FCF: The stock is cheaper than 84% of its peers based on free cash flow.

These metrics indicate that KTB is reasonably priced relative to its earnings and cash flow, making it a candidate for value investors.

Profitability

KTB’s profitability stands out in the apparel industry:

• Return on Equity (ROE): 53.71%, outperforming 98% of competitors.
• Operating Margin: 14.23%, above 86% of industry peers.
• Profit Margin: 8.82%, improving in recent years.

The company’s ability to generate high returns on capital suggests efficient operations and pricing power.

Financial Health

KTB maintains a stable financial position:

• Altman-Z Score: 4.67, indicating low bankruptcy risk.
• Current Ratio: 2.78, reflecting strong short-term liquidity.
• Debt Management: While the debt-to-equity ratio is high (1.72), free cash flow covers debt comfortably.

Growth Outlook

Though not a high-growth stock, KTB shows steady progress:

• EPS Growth: Up 19.37% over the past year, with an expected 8.59% annual growth ahead.
• Revenue Growth: Modest but stable, with acceleration expected.

For investors seeking a value play with reliable profitability and financial stability, KTB warrants consideration.

Our Decent Value screener lists more stocks with similar characteristics.
For a deeper dive, review the full fundamental report on KTB.

Disclaimer

This is not investing advice! The article highlights observations at the time of writing, but you should conduct your own analysis before making investment decisions.