IPAR Stock Study (7-5-24)

I recently studied Inter Parfums Inc. (IPAR) with a closing price of $114.28.

M* writes:

     > Inter Parfums Inc operates in the fragrance business and manufactures,
     > markets, and distributes fragrances and fragrance-related products.
     > It sells its product under the brand names called JIMMY CHOO, bebe,
     > Paul Smith, Abercrombie and Fitch, COACH, and others. The company
     > operates in two operating segments namely European based operations,
     > and United-States operations. The group sells its products to
     > department stores, perfumeries, specialty stores, and domestic and
     > international wholesalers and distributors.

Over the past 10 years, this medium-size company has grown sales and EPS at annualized rates of 10.9% and 18.8%, respectively. Lines are mostly up, straight, and parallel except for a sales decline in ’15 and sales/EPS decline in ’20. I won’t exclude ’20 to avoid artificial inflation of growth rates, but 5- and 10-year R^2 of 0.74 and 0.83 could justify it.

Over the past decade, PTPM leads peer averages but trails the industry while increasing from 11.4% (’14) to 18.9% (’23) with a last-5-year mean of 16.3%. ROE trails peer and industry averages despite increasing from 7.5% (’14) to 22.0% (’23) with a last-5-year mean of 15.7%. Debt-to-Capital is much lower than peer and industry averages despite increasing from 0.1% (’14) to 21.6% (’23) with a last-5-year mean of 18.0%.

Quick Ratio is 1.3 per M* and Interest Coverage is 22.2. Value Line grades the company “A” for Financial Strength.

With regard to sales growth:

• YF projects YOY 10.3% and 8.8% for ’24 and ’25, respectively (based on 3 analysts).
• Zacks projects YOY 10.3% and 8.3% for ’24 and ’25, respectively (3 analysts).
• Value Line projects 8.2% annualized growth from ’23-’28.
• CFRA gives ACE of 10.3% YOY and 9.6% per year for ’24 and ’23-’25, respectively (3).

I am forecasting below the range at 7.0% per year.

With regard to EPS growth:

• MarketWatch projects 9.7% and 9.9% per year for ’23-’25 and ’23-’26, respectively (based on 5 analysts).
• Nasdaq.com projects 11.1% YOY and 11.7% per year for ’25 and ’24-’26 [5/4/2 analyst(s) for ’24/’25/’26].
• YF projects YOY 8.4% and 11.3% for ’24 and ’25, respectively (3), along with 5-year annualized growth of 12.0%.
• Zacks projects YOY 8.4% and 11.0% for ’24 and ’25, respectively (4).
• Value Line projects 10.0% annualized growth from ’23-’28.
• CFRA gives ACE of 8.4% YOY and 9.8% per year for ’24 and ’23-’25, respectively (3).

My 7.0% per year forecast is below the long-term estimate range (average of two: 11.0%). Initial value is 2024 Q1 EPS of $4.35 (annualized) rather than ’23 EPS of $4.75/share.

My Forecast High P/E is 28.0. Over the past decade, high P/E falls from 39.7 (’14) to 33.9 (’23) with a last-5-year mean of 36.1 (excluding outlier 62.0 in ’20) and a last-5-year-mean average P/E of 29.2. I am below the entire range.

My Forecast Low P/E is 20.0. Over the past decade, low P/E falls from 26.1 (’14) to 20.2 (’23) with a last-5-year mean of 23.5 (no outlier in ’20). I am forecasting near the bottom of the range [only ’22 (17.1) and ’16 (19.0) are less].

My Low Stock Price Forecast (LSPF) of $87.00 is default based on initial value given above. This is 23.9% less than the previous low and 19.7% less than the 52-week low.

Over the past decade, Payout Ratio (PR) ranges from 27.3% in ’20 to 60.8% in ’19 with a last-5-year mean of 46.0%. I am forecasting below the range at 27.0%.

These inputs land IPAR in the HOLD zone with a U/D ratio of 2.1. Total Annualized Return (TAR) is 9.3%.

PAR (using Forecast Average—not High—P/E) of 6.2% is less than I seek for a medium-size company. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on TAR instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on only 57 studies in the past 90 days (my study along with 22 outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, Forecast Low P/E, and PR are 9.5%, 11.0%, 30.0, 20.0, and 46.0%, respectively. I am lower on all but the fourth (20.0). Value Line projects a future average annual P/E of 25.0 that is equal to MS and higher than mine (24.0).

MS high / low EPS are $7.58 / $4.35 versus my $6.10 / $4.35 (per share). My high EPS is less due to a lower growth rate. Value Line’s high EPS of $7.65 is greater than both.

MS LSPF of $93.00 implies a Forecast Low P/E of 21.4: greater than the above-stated 20.0. MS LSPF is 6.9% greater than the default $4.35/share * 20.0 = $87.00 (identical to mine) resulting in more aggressive zoning.

With regard to valuation, PEG is 3.5 (overvalued) per my projected P/E. Relative Value [(current P/E) / 5-year-mean average P/E] is slightly low at 0.88.

MOS is robust in the current study because my inputs—especially EPS growth—are at or below MS and near the bottom of or below respective analyst/historical ranges. MS TAR of 15.3% is six percentage points greater than mine.

Per U/D, IPAR is a BUY under ~$107/share. The stock needs to fall under $86 to meet the BI TAR criterion given a forecast high price ~$171.