Style Up Your Portfolio With the Company Behind Vans, Supreme

V.F. Corp is the world's largest publicly held apparel maker. Its main brands include The North Face, Vans, Timberland and Supreme. VFC traditionally commanded a premium valuation while also yielding about 2.36%. Covid-related factors sent earnings per share lower in fiscal 2020. Results rebounded strongly in fiscal 2021 in the wake of stimulus checks, child tax credits and pent-up demand. Fiscal 2022, which ends April 1, 2023, has again seen lean times. Analysts now expect EPS to have declined by about 34% year-over-year when fiscal fourth-quarter is reported. Knowing all that, VFC still appears too cheap based on its long-term history. The company is a world leader that has dealt with adversity many times before. It has always come out better after making any necessary adjustments. Management recently trimmed quarterly dividends by 41.1% (from 51 cents to 30 cents) to put it into alignment with, we hope, temporarily depressed profit margins. That $1.20 annual rate now provides a juicy 4.99% current yield. VFC shares topped $67 during each of the nine years from 2014 through 2022. Value Line sees future EPS returning to over $3 over the next few years. If that proves accurate buyers at today's quote near $24 should make out very well. VFC previously sold for about 21.4-times earnings on average. A partial regression to the mean valuation adjustment could easily see VFC get back to 15 - 18-times earnings pending headier growth. I do not envision VFC getting back to $60 anytime soon. It would not be shocking, though, to see it trend back to $34 - $40 before long. If things go well VFC shares could end up being huge winners. If only modest profits gains persist there should still be generous total returns on tap from around $24. Independent research house Morningstar is among the bullish crowd regarding VFC's prospects. It labels the shares as 5-star buys while calling present day fair value as $60. I would be a bit skeptical about seeing that number soon, but it is certainly not an unreachable goal. Fast Graphs calls 17.8 as a long-term normalized multiple for VFC. Seeing the shares climb back to only 15-times FastGraphs year ahead EPS estimate of $2.23 would still deliver a solid 44.2% total return. It is hard to imagine that V.F. Corp will not be higher a year or two out. If you agree, consider shorting some Jan. 17, 2025 expiration date in-the-money puts at $25, $30 or $35 strike prices. Actual pricing on those, with VFC at $24.16, is shown below. Worst-case, forced purchase prices would drop to $19.20, $20.90 or $22.10 respectively depending on the strike prices selected. VFC has not traded below $23.71 per share since the early days of 2011. That means owning VFC at any of the indicated if exercised prices would have been a winning position 100% of the time dating back greater than twelve full years. Annual dividends in 2011 were 65 cents vs. $1.20 today. Sales per share are now almost 40% higher. The long-term expiration date on the puts allows plenty of time for V.F. Corp to have executed its turnaround plan. VFC is not the shiniest gem in the stock market showcase. Its low valuation, though, makes it a prime choice to deliver good to great total returns for investors willing to buy and hold for 12 to 36 months. By then you will likely have pocketed some serious dividend income, while also qualifying for long-term capital gains tax treatment on shares held for over one year.

Style Up Your Portfolio With the Company Behind Vans, Supreme

V.F. Corp still appears too cheap based on its long-term history, so here's how to trade it.

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