Tiffany 1Q Profits Launch Stock to New Highs
(TIF, $95.67, up $7.44 midday)
Global jewelry retailer Tiffany & Co. (TIF) saw its shares jump over 8% this morning as the company reported first quarter 2015 earnings per share (EPS) of $0.97 vs. $0.70 last year; dramatically higher than Wall Street’s $0.77 estimate (January year-end). Revenue growth came in on-target with Wall Street’s estimates, and reflected broad increases across geographic areas and product lines. Expanding margins, from cost reductions and price increases, led the company to raise full-year estimates today.
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Earnings outlook: Tiffany’s 2015 price/earnings ratio (PE) is 22.8, way above the projected ’15 EPS growth rate of 12.6%. When the PE is much higher than the earnings growth rate, this is a warning to investors that the stock is overvalued. As such, the stock does not merit a buy rating at Goodfellow LLC.
The dividend yield is 1.42%.
Technical Chart: The stock broke past medium-term price resistance at $82 in November, rose as high as $94.88 in March, then pulled back to $84. This morning’s price leap took the stock to new highs.
The chart is bullish, and the stock could either climb immediately, or bounce back down to $92 for a little price consolidation.
Assessment: I am not recommending that anybody buy this overvalued stock. Current shareholders should develop a sell strategy — such as using stop-loss orders — because the overvaluation adds a serious layer of risk to stock investing.
Goodfellow LLC Rating: Growth & Income, Volatile, Public. (05-21-14)
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Crista Huff
President
Goodfellow LLC
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