Stocks: (RL)(LIZ)

Polo Ralph Lauren is expensive by several measures. But, one of the risks in owning the shares is that Ralph Lauren controls the board, he is the brand, and he is not young. Whether the company will due as well once he is gone is a nagging concern.

Almost 20% of Polo’s revenue comes from May and Federated stores. Those companies have merged, so their pricing leverage has improved.

Over the last several years, the company”s stock price has run wild. From a low of under $17 in October 2002 the stock has moved to just below $77 currently.

Revenue has been growing well, but in the numbers for the last quarter, when the purchase of Polo Jeans was backed out, the topline was up only 9%.

Even Wall St. analysts do not think the stock will go much higher, at least not short term. A Thomson/First Call survey of seven analysts who hold the stock found the their mean price target for Polo was only $81.57.

The company’s growth in both revenue and operating income over the last three years has been excellent, but the stock price is getting ahead of the business  Polo’s price to sales is 1.94. At competitor Liz Claiborne that number is .9 times.

Great company. Overpriced shares.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.

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