What is TPR's Intrinsic value?

Tapestry Inc (TPR) Intrinsic Value Analysis

Executive Summary

As of June 14, 2025, Tapestry Inc's estimated intrinsic value ranges from $51.87 to $96.03 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $96.03 +21.7%
Discounted Cash Flow (5Y) $89.82 +13.8%
Dividend Discount Model (Multi-Stage) $60.35 -23.5%
Dividend Discount Model (Stable) $62.62 -20.6%
Earnings Power Value $51.87 -34.3%

Is Tapestry Inc (TPR) undervalued or overvalued?

With the current market price at $78.91, the stock appears to be fairly valued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Tapestry Inc's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments
  3. Earnings Power Value (EPV): Values the company based on its current earnings power, assuming no growth

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.9 1.09
Cost of equity 8.0% 10.9%
Cost of debt 7.0% 7.5%
Tax rate 17.9% 18.2%
Debt/Equity ratio 0.44 0.44
After-tax WACC 7.3% 9.5%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 8.4% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $6,671 (FY06-2024) to $9,341 (FY06-2034)
  • Net profit margin expansion from 12% to 15%
  • Capital expenditures maintained at approximately 2% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $90 $20,313M 79.9%
10-Year Growth $96 $21,605M 61.8%
5-Year EBITDA $62 $14,592M 72.0%
10-Year EBITDA $73 $16,809M 50.8%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 35.7%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 9.5%
  • Long-term growth rate: 3.0%
  • Fair value: $60.35 (-23.5% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 10.9% (Low) to 8.0% (High)
  • Long-term growth rate: 2.0% (Low) to 4.0% (High)
  • Fair value range: $32 to $93
  • Selected fair value: $62.62 (-20.6% from current price)

3. Earnings Power Value (EPV)

EPV assesses a company's value based on its current normalized earnings power, assuming no growth.

EPV Component Value
Normalized Earnings $1,026M
Discount Rate (WACC) 9.5% - 7.3%
Enterprise Value $10,837M - $14,026M
Net Debt $1,659M
Equity Value $9,178M - $12,366M
Outstanding Shares 208M
Fair Value $44 - $60
Selected Fair Value $51.87

Key Financial Metrics

Metric Value
Market Capitalization $16389M
Enterprise Value $18048M
Trailing P/E 19.07
Forward P/E 18.31
Trailing EV/EBITDA 9.00
Current Dividend Yield 187.32%
Dividend Growth Rate (5Y) -4.12%
Debt-to-Equity Ratio 0.44

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 30% $28.81
Discounted Cash Flow (5Y) 25% $22.45
Dividend Discount Model (Multi-Stage) 20% $12.07
Dividend Discount Model (Stable) 15% $9.39
Earnings Power Value 10% $5.19
Weighted Average 100% $77.91

Investment Conclusion

Based on our comprehensive valuation analysis, Tapestry Inc's weighted average intrinsic value is $77.91, which is approximately 1.3% below the current market price of $78.91.

Key investment considerations:

  • Strong projected earnings growth (12% to 15% margin)
  • Consistent cash flow generation

Given these factors, we believe Tapestry Inc is currently fairly valued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.