Tapestry Inc. scores 98 for management and 74 for moat. The management score rests on a return on invested capital of 29.4% and a gross margin of 77.8% — figures that describe a business turning capital into profit efficiently. The balance sheet carries debt at 5.71x equity, which magnifies both the returns above and the risk beneath them. The solid moat and exceptional management are not the same judgement, and the gap between them is where the argument about this business sits.
The valuation runs on assumptions chosen to understate rather than flatter. Growth is modelled at 6.9% a year, below the 7.0% actually measured over the last decade — the model caps growth rather than extrapolating a good run forwards. The exit multiple assumed is 13.7x. That produces an intrinsic value of $47.79, a 10-CAP price of $88.60 and a payback time price of $96.61, with the value zone set at the highest of the three, $96.61. Today's price of $119.28 sits 23% above it.
The operating figures describe a business performing at a high level; the price asks for that performance to continue and then some. A margin of safety score of 20 is the measure of how little room that leaves for being wrong.
| Price | $119.28 |
| Market cap | $24.1B |
| P/E ratio | 16.4x |
| Return on invested capital | 29.4% |
| Gross margin | 77.8% |
| Debt to equity | 5.71x |
| Free cash flow yield | 6.1% |
| Growth rate used | 6.9% |
| Growth rate measured | 7.0% |
| Exit multiple assumed | 13.7x |
| Company | Moat | Buy price |
| Restaurant Brands Intl. (QSR) | 54 | $53.50 |
| Las Vegas Sands Corp. (LVS) | 43 | $73.20 |
| Ulta Beauty (ULTA) | 82 | $442.14 |
| Casey's General Stores, Inc. (CASY) | 95 | $370.19 |
Every number above is built on assumptions that can be changed. In Moatly you can move the growth rate, the exit multiple and the margin of safety and watch every figure recalculate, so you are testing your own view of Tapestry Inc. rather than accepting ours.