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Buffett-inspired portfolio strategy flashing buy for this fashion accessories stock

Validea's pick of the week provides a detailed report on a company that scores well in the stock-screening service's model portfolios. On, investors can analyze 1,000 Canadian stocks through 12 different guru-based models and get individual reports on each company. Globe Investor has a distribution agreement with Try it.

Texas-based Fossil Group Inc. is a global consumer fashion accessories firm whose offerings include a line of men's and women's fashion watches and jewelry, handbags, small leather goods, belts, sunglasses, soft accessories and clothing. Its products are distributed globally through various distribution channels, including wholesale in countries where the company has a physical presence, direct to the consumer through its retail stores and commercial websites and through third-party distributors in countries where the company does not maintain a physical presence. It has a market cap of $4-billion (U.S.).

The Warren Buffett-based strategy likes that it has upped EPS in every year of the past decade, and gives the stock strong interest. It has grown EPS at a 20-per-cent clip over the long term (using average of 3, 4, 5 yr EPS growth rates), and revenues at a 14-per-cent pace (using average of 3, 4, 5 yr sales growth rates). The company has a 10-year avg return on equity of 22.0 per cent, which the Buffett model also likes.

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Fossil trades for just 11.5 times trailing 12-month EPS. It has a return on capital (EBIT/tangible capital employed) of 39 per cent, which impresses the Joel Greenblatt-based model. It has a 12.7-per-cent earnings yield (EBIT/enterprise value), part of why the Greenblatt-based model has some interest.

The company has a 3.3 current ratio, a sign of good liquidity, according to the Benjamin Graham-based approach. Its debt/equity ratio (64 per cent) is reasonable, and it has a stellar 11.5-per-cent three-year after-tax avg. profit margin.

The Peter Lynch model likes its 0.57 P/E-to-growth ratio and has strong interest in the stock.

John Reese is long FOSL.

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