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number cruncher

Mr. Bowman is a portfolio manager at Hamilton-based Wickham Investment Counsel Inc., an adviser to high-net-worth clients.

What are we looking for?

Strong luxury goods companies, ideally trading at reasonable valuations.

The screen

We started with companies around the world larger than $1-billion (U.S.) in market capitalization and sorted them from the largest to the smallest.

The P/E ratio (price-to-earnings ratio) is a valuation metric of a company's share price compared to its price per share. Companies with low P/E ratios generally show better value.

The PEG ratio is the price to earnings ratio divided by the company's earnings growth rate. The lower the PEG ratio, the more undervalued the company.

The P/Sales (price to sales) is a measure that compares a company's stock price to its revenues. A low ratio may indicate an undervalued company.

The Profit Margin is a ratio of profitability calculated as net income divided by revenues. It measures how much of every dollar of sales the company actually keeps as earnings. A higher margin indicates a more profitable company.

Sales growth: We considered 1-year and 5-year compound annual growth rates, and both had to be positive.

What did we find?

There were no companies that scored better than the averages in all six categories, but there were five that scored better than the average in five categories.

Chow Tai Fook Jewellery Group, Chow Sang Sang Holdings and Luk Fook Holdings are all high-end jewellery stores located in Hong Kong. PVH Corp. markets a number of brands internationally, such as Calvin Klein, Tommy Hilfiger, IZOD and Speedo. Michael Kors Holdings Ltd. manufactures and markets luxury apparel for men and women in 74 countries.

You should contact an investment professional or conduct further research before investing in any of these companies.

Luxury goods companies with reasonable valuations