hi I'm Jimmy in this video we're looking at the VF Corp ticker symbol VFC this
video is part of our dividend aristocrat series where we're analyzing each of the
companies within the dividend aristocrat ETF the goal of this series is to see if
we can find the top dividend aristocrat stock that ultimately have a good chance
of paying us a reliable dividend and ideally getting us closer to our
personal goal of financial freedom okay so first I'm gonna dive into VF
corp business and then we're gonna see if we can come up with a fair value for
VF corp stock using a discounted cash flow valuation technique
okay so let's dive into their business so we can break their business into four
main categories first up we have their active segment which accounted for about
34 percent of revenue from last year their active set of segments includes
brands like vans or JanSport they sell luggage they sell backpacks and active
Footwear things along those lines then we have the outdoor segment which is
about the same size as the active segment they have brands like Timberland
in the North Face they primarily focus on products like Footwear and outdoor
apparel then they have their gene segment this segment includes brands
like Wrangler or Lee and as we might guess well they sell mostly casual denim
products okay simple enough then there's smaller segments of their work segment
this segment has brands like Dickies this segment focuses on apparel and
footwear that most of us would wear to work now vfc actually does a good job of
breaking down their business in different ways making it a little easier
for us to analyze another way they break down their business is by region and as
we could see the Americas brought in the most revenue last year followed by
Europe and then the Asia Pacific region now I bring this out because the
management team of vfc have said that one of their goals or one of the four
key drivers to their long term success is the growth of the asia-pacific
business line especially or specifically in China they believe that this should
help spur additional growth for the company and is one of the real
opportunities for their business and for curious according to management their
four primary drivers of growth are expected to be their expansion in Asia
that's with I already mentioned then they're looking
to invest in their own brands to help improve their performance then they're
trying to improve their performance with their customers that consumer experience
now that's true on both the retail side but also with their direct to consumer
portion of their business which is their final point they believe that there's a
big growth opportunity in their direct-to-consumer business which has
been growing fairly well in the past few years ok now this brings us to their
revenue and as we could see even with analyst projections of revenues analyst
projections of the one in the green bars well revenue has been somewhat stagnant
now we may notice one interesting part to this is that we seem to have skipped
over 2018 and this actually took me a bit of reading to sort out and for that
I think the easiest way to explain what happened there is to switch over to a
quarterly chart now what's most important for us to notice with this is
that although it seems that we skipped over most of 2018 well if we switch from
quarters to the actual day that these quarters end we can see that they did
not in fact skip any time periods at all what happened was this company vfc
switched the end of year quarter for them he used to end in December of every
year now they moved it for some crazy reason over to March so as an example in
2017 those were the four quarters that made up the full year well in 2018 these
four quarters made up the full year and to make it even more confusing since
these four quarters ended in 2019 they now call this the fiscal year 2019 and
essentially they started calling this one quarter here a transition period so
even when we pull down Yahoo Finance just as an example well we may even
though we're looking at annual numbers and here's the annual number indicator
even though we're looking annual numbers well we may think that they might have
had a really bad 2018 when we look at this huge drop in revenue okay so
although they don't really explain this is that much I just want to point that
out because I thought that was an interesting was an unusual thing to sort
through okay now we know what happened now let's see if we could value vfc
stock using our discounted cash flow valuation method
okay so here's what I came up with for the VF Corporation as far as DCF I'm not
going to spend too much time with how I did this calculation actually did a much
longer video on how to do this whole process there's a link in the
description below if you're curious I even created an Excel template that
you're welcome to have link in the description below but basically I took
these estimates up here I took these from analysts now the fact that they
changed when their year end is is somewhat irrelevant for this particular
valuation technique since we are projecting out the next four years so
the fact that they're ending in March now and not December really doesn't
matter to this valuation method so I took analyst estimates here and then I
discounted them by a required rate of return of eight and a half percent
that's what I've been using for all the companies so far in this series just to
keep a consistent same is true for our perpetual growth rate of two and a half
percent well that gives us a fair value of the company of a bit over twenty five
billion dollars we divide that by the shares outstanding they get about three
hundred ninety nine million shares outstanding as of this the recording of
this video that gives us a fair value for the company of about $64 per share
and when we consider that VCF is currently trading at about eighty three
dollars per share well it would seem that our fair value implies that the
stock is currently overpriced so clearly that's a negative thing now on the
positive side one of the main reasons we're looking at this company is that
VCF is part of the dividend aristocrats ETF which means that we might expect
their dividend history to look something like this and clearly it does look quite
good and then when we add earnings per share
well once again they look fairly decent earnings for sheriff consistently
covered their dividend per share which is exactly what we want to see now when
we look at this well for me the positive side of this is their dividend history
and that in theory although I like their business I like I think that they have a
solid business I think they bring a lot to the table over the long run I think
it makes much more sense to wait to buy this stock at a much better price even
though their stock price has fallen a significant amount recently I still
think it makes or sense to buy it closer to our
calculation of fair value whatever your calculation of the fair value is I would
stick with that now if you're curious about when the best time to buy a stock
is I actually did a video on how to come up with that using your own analysis
there's a link right here and there's a link in the description below if you're
curious that could be a good next video to watch and I want to thank you for
sticking with me all the way into the video I really appreciate I hope you
found it interesting thanks and I'll see you in the next video