TPR

Analysis of Tapestry, Inc. (TPR)

Technical Analysis TPR exhibits strong momentum, having rallied significantly to near its 52-week high. The stock's impressive short-term gains highlight positive investor sentiment. However, its high beta and proximity to peak levels suggest it may be overbought, increasing the likelihood of near-term consolidation.

Fundamentals TPR demonstrates strong profitability and brand power, with healthy gross margins and a solid return to operating income. A major concern is its highly leveraged balance sheet, indicated by an elevated debt-to-equity ratio. While current earnings comfortably cover interest payments, high leverage amplifies risk in an economic downturn.

Valuation Valuation metrics appear stretched, with a very high trailing P/E and P/B ratio implying significant growth expectations. The forward P/E is more reasonable but still requires robust future performance to justify. These multiples suggest the stock is priced at a premium, leaving little room for error.

Risk The primary risk is high volatility, as TPR's beta indicates it is more sensitive to market swings. Substantial past drawdowns underscore its potential for sharp declines if market sentiment shifts or growth forecasts are not met.

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Buy Recommendation

TPR is not a recommended buy at current levels. While the company has strong brands and profitability, the stock appears overbought technically and richly valued fundamentally. The high financial leverage and market sensitivity add significant risk without a sufficient margin of safety. Investors may find better opportunities after a price correction or upon clearer signs of sustainable, debt-free growth.

RockFlow Model Forecast: Three Scenarios for 2026

Based on the provided analysis, the 12-month outlook for Tapestry, Inc. (TPR) is cautious with a neutral to slightly negative bias. Key near-term catalysts are limited, with the stock's performance heavily dependent on the company meeting its high growth expectations to justify its premium valuation. The primary risks are significant and include its highly leveraged balance sheet, which makes it vulnerable to an economic slowdown or rising interest rates, coupled with its high beta that could lead to sharp declines if market sentiment sours. Given the overbought technicals and stretched valuation, a more realistic target range would be a pullback to the $110-$120 area, which would offer a better risk-reward profile than the current price of $134.38.

Wall Street Consensus

Most Wall Street analysts are optimistic about TPR's 12-month outlook, with consensus target around $133.17, indicating expected upside potential.

Overall, TPR has investment potential but also faces challenges. Here are key factors to weigh before investing.

TPR demonstrates exceptionally strong recent performance with substantial outperformance versus the broader market. The stock has delivered robust gains over the past several months, significantly recovering from its 52-week lows and approaching its yearly high.

The stock has posted impressive short-term gains of 8.82% over one month and 18.42% over three months, substantially outperforming the market by 15.05% during the latter period. This strong momentum reflects significant positive sentiment, though the high beta of 1.643 indicates the stock is considerably more volatile than the market.

Currently trading at $134.38, TPR is near the top of its 52-week range ($58.39 - $136.04), sitting just 1.2% below its peak. This positioning, coupled with the substantial recovery from the maximum drawdown of -32.07%, suggests the stock is in overbought territory and may be susceptible to near-term consolidation or profit-taking.

Of course. Here is a fundamental analysis of Tapestry, Inc. (TPR) based on the provided quarterly data.

1. Revenue & Profitability

TPR demonstrates robust profitability with a healthy gross profit margin of approximately 76.3%, indicating strong pricing power and brand value. The company has returned to solid operating income in the most recent quarter (Q1 2026), with an operating margin of 19.3% and a net profit margin of 16.1%. This is a significant recovery from the prior quarter (Q4 2025), which showed a substantial operating and net loss, suggesting the previous period may have been impacted by large, non-recurring expenses.

2. Financial Health

The company's financial health is a key concern, characterized by a high degree of leverage. The debt-to-equity ratio of 10.51 is exceptionally high, indicating that the company is funded primarily by debt rather than equity. While the current ratio of 1.52 appears adequate for covering short-term obligations, the interest coverage ratio of 25.6 is strong and shows that the company's current operating earnings are more than sufficient to cover its interest expenses.

3. Operational Efficiency

Operational efficiency is mixed. The return on equity (ROE) is strikingly high at 68.8%, which is impressive but heavily influenced by the high financial leverage (as seen in the elevated company equity multiplier of 15.93). Conversely, the return on assets (ROA) is a modest 4.3%, indicating that while the use of debt boosts ROE, the core asset efficiency is low. This is further evidenced by a relatively low asset turnover ratio of 0.27, suggesting the company is not generating a high volume of sales relative to its asset base.

Valuation Level Analysis

TPR's current valuation metrics present a mixed and cautionary picture. The stock appears significantly overvalued based on its trailing P/E of 101.33 and an extraordinarily high P/B of 68.84, which suggests the market price is vastly disconnected from the company's book value. While the forward P/E of 21.3 is more reasonable, it is still paired with an elevated P/S of 5.49 and a very high EV/EBITDA of 72.94, indicating expectations for substantial future growth that may not be fully justified. The negative PEG ratio further signals that earnings growth is not keeping pace with the high P/E multiple, presenting a significant risk.

Peer Comparison

A direct comparison against specific industry averages is not possible with the provided data. However, the valuation metrics themselves suggest TPR is likely trading at a substantial premium to its peers. A P/B north of 68 and an EV/EBITDA over 72 are atypical for most mature industries and would generally imply the market is pricing in exceptional growth or a unique competitive advantage that may not be sustainable. Without industry benchmarks, the analysis relies on the premise that such extreme multiples are difficult to justify in the long term, pointing to a potentially overvalued position.

Risk Analysis for TPR

Volatility Risk: TPR's Beta of 1.643 indicates significantly higher volatility than the broader market, as the stock tends to move about 64% more than market benchmarks. This elevated volatility is further evidenced by a substantial maximum drawdown of -32.07% over the past year, highlighting considerable downside risk and potential for sharp price declines during market downturns.

Other Risks: The absence of reported short interest suggests limited bearish speculation, which could imply market confidence or low trader attention; however, this lack of data does not eliminate fundamental risks. Liquidity and other market risks should still be assessed, as low trading volumes or external sector pressures could amplify volatility given the stock's high Beta.