Over the past six months, Inter Parfums’s stock price fell to $108.53. Shareholders have lost 15.8% of their capital, which is disappointing considering the S&P 500 has climbed by 17.7%. This may have investors wondering how to approach the situation.
Given the weaker price action, is now a good time to buy IPAR? Find out in our full research report, it’s free.
Why Are We Positive On IPAR?
With licenses to produce colognes and perfumes under brands such as Kate Spade, Van Cleef & Arpels, and Abercrombie & Fitch, Inter Parfums (NASDAQ: IPAR) manufactures and distributes fragrances worldwide.
1. Long-Term Revenue Growth Shows Strong Momentum
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last three years, Inter Parfums grew its sales at a solid 14.6% compounded annual growth rate. Its growth beat the average consumer staples company and shows its offerings resonate with customers.
2. Increasing Free Cash Flow Margin Juices Financials
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
As you can see below, Inter Parfums’s margin expanded by 8.7 percentage points over the last year. This is encouraging, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability. Inter Parfums’s free cash flow margin for the trailing 12 months was 13.7%.
3. Stellar ROIC Showcases Lucrative Growth Opportunities
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).
Inter Parfums’s five-year average ROIC was 27.4%, placing it among the best consumer staples companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.
Final Judgment
These are just a few reasons why Inter Parfums ranks highly on our list. After the recent drawdown, the stock trades at 20.1× forward P/E (or $108.53 per share). Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
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