Opinions
The Panic-Proof Portfolio (Stockchase Research)
Signet Jewelers Ltd.
SIG-N
TOP PICK
Aug 13, 2024
Stock price when the opinion was issued
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Signet Jewelers Limited is the world's largest retailer of diamond jewelry. Signet operates approximately 2,900 stores primarily under the name brands of Kay Jewelers, Zales, Jared, H.Samuel, Ernest Jones, Peoples, Piercing Pagoda, and JamesAllen.com. Further information on Signet is available at www.signetjewelers.com. See also www.kay.com, www.zales.com, www.jared.com, www.hsamuel.co.uk, www.ernestjones.co.uk, www.peoplesjewellers.com, www.pagoda.com, and www.jamesallen.com.
The CEO has done a great job turning around this small-cap. Post-pandemic, engagement ring sales have picked up. They last reported softer than expected sales, though a revenue beat, but conservative guidance. Shares dropped 12%. Then, SIG announced a major share buyback and raised guidance. It trades under 10x PE this year.
Our PAST TOP PICK with SIG has triggered its stop at $89. To remain disciplined, we recommend covering the position at this time. Combined with our previous guidance, this will result in a net investment gain of 24%.
SIG has over 2600 retail jewelry stores through North America and Europe. It trades 6x earnings, under 2x book value and supports a robust 32% ROE. Its dividend is backed by a payout ratio under 10% of cash flow. We recommend setting a stop-loss at $60, looking to achieve $97 -- upside potential of 28%. Yield 1.3%
(Analysts’ price target is $120.40)