Fossil

01/08/2015 7:00 am EST

Focus: STOCKS

Roy Ward

Chief Analyst, Cabot Benjamin Graham Value Investor

Our top growth-oriented idea for 2015 is an international designer, marketer, and distributer of consumer fashion accessories, notes J. Royden Ward, of Cabot Benjamin Graham Value Investor.

Fossil Group (FOSL) distributes its products in myriad ways: wholesale in countries where it has a physical presence, direct to the consumer through its retail stores, from Web sites, and through third party distributors.

Its offerings include a line of men’s and women's fashion watches and jewelry, handbags, small leather goods, belts, sunglasses, and clothing.

Fossil’s wide range of products are sold under many brand names, including MICHELE, Relic, Burberry, Emporio Armani, Michael Kors, Marc Jacobs, DKNY, adidas Originals, and ZODIAC.

New products, such as smart watches, are also attracting a lot of attention. Fossil has an agreement with Google and Intel to introduce a new smart watch in 2015.

Sales will likely rise 9% and EPS will surge 37% to 8.15 in 2015. Results could receive an additional boost if Fossil’s new smart watch takes off. The company’s weak second-quarter results caused the stock to drop from a high of $135.

Robust financial results in the third quarter present a harbinger of better sales and earnings ahead.

FOSL shares are somewhat expensive at 18.2 times current EPS, but EPS are forecast to rise 13% per year during the next five years.

The balance sheet is strong with low debt and lots of cash available to fund future needs. Fossil does not pay a dividend, but that could change within the next couple of years. Buy FOSL now.

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