V.F. Shares Undervalued, Brings Former Logitech CEO On Board

Key Points

• V.F. has announced a new face to take the role of CEO, former Logitech CEO Bracken Darrel has stepped in to fill these duties and attempt to replicate his success at Logitech. 
• The Logitech stock rose nearly ten times during Darrel's leadership; analyst ratings may indicate the possibility of history repeating itself. 
• Earnings expectations, dividend yields, and relative valuation multiples have lined up and agreed to open a path for VFC stock to rally.

A very unusual event has hit the newswires for investors and traders in the pre-market hours of Tuesday morning, after a slower Monday due to U.S. financial markets closing; both V.F. NYSE: VFC and Logitech International NASDAQ: LOGI investors have to react to news affecting two different sectors.

Logitech CEO - now former CEO - Bracken Darrell has accepted a position to take the role within V.F. Neither of the two companies seems to be having any price action-reaction in the pre-market session. Could a new operative field suit Darrell well, or will his recent performance be a fraction of his previous success?

Shares of V.F. have suffered a dismal decline starting from their three-year peak of $90.79 per share in 2021 after a nearly 82% decline to reflect today's price below $20 per share; investors may have a new reason to believe the stock is now cheap.

The stock increased by 2.3% as investors had time to digest what this shift meant for the company's future. Analyst expectations and perceived valuations by the broader markets may imply deep signs of undervaluation today.

Replicable Success?

Bracken Darrel became Logitech's CEO in 2013; ever since then, the company has significantly grown its market share and, subsequently, its financials. Logitech's chart will show a similar dynamic as broader markets deemed Darrel's leadership worthy of a richer valuation of the underlying business, rising from a low of $6.24 per share during his first year as CEO, Logitech stock rose to a high of $140.17 during 2021.

Darrel closes his tenure as Logitech's CEO with a stock price of approximately $56.70, a rise of nearly ten times since he began to lead the company into profitable ventures. 

V.F. stock's rise at the market opening may signify a bullish perception of what Darrel can accomplish within the company in the near future, not to mention the long-term effects that could be achieved. Perhaps history will repeat itself, and Darrel will lead V.F. from its current low price and see the stock quote reach new highs in a few years.

V.F. analyst ratings agree with the company's upside; even before adjusting their price targets to reflect the new leadership's potential, they see a near 45% upside from today's prices.

Considering that, based on the past twelve months of earnings at V.F., the stock is trading for a 65.0x price-to-earnings multiple. Being one of the most - if not the most - expensive stocks in the sector, on various valuation bases, combined with the massive decline in the stock price, brings forth one of the most critical indicators for value investors and short-term traders.

The perception from broader markets is that, as of today, the underlying current - and future - earnings for V.F. are worthy of a richer multiple, implying a bullish catalyst to come and close down this outlier gap. 

Where to Next

Earnings estimates point to a beat relative to management guidance; for the second and third quarters of 2023, analysts expect $0.98 and $1.19 earnings per share, respectively, where management provided advice for a range between $0.70 to $0.75 per share.

These expectations for beating earnings may come as a significant tailwind in the sector or otherwise from the overall economy as the United States FED decides to pause on its path to hiking interest rates. These new annualized expectations for $2.76 per share of earnings will place the stock at a severely undervalued price.

If analysts expect full-year 2023 earnings per share of $2.76, investors can acquire the stock at a forward P/E ratio of below 10.0x. Another reason a major catalyst may be underway for the stock price is the current dividend yield. Sporting a near 9.0% yield today places V.F.'s dividend at one of the highest levels in its history, implying that either the stock price will need to rise or the dividend payout be cut enough to normalize the yield. Considering the optimistic financial future of the business, the former is the more probable scenario.

Considering the current stock price is equivalent to that of 2009 when earnings were half of today's expectations, there is a fundamental and logical reasoning behind rating V.F. an absolute buy today. However positive these angles may seem, investors will need to place a lot of faith and pressure on the new CEO. The focus will be on recouping the stock's gains as a voting mechanism for his vision as the company's new face.