Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Should I Invest in Burberry Group?

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

LONDON -- To me, capital growth and dividend income are equally important. Together, they provide the total return from any share investment and, as you might expect, my aim is to invest in companies that can beat the total return delivered by the wider market.

To put that aim into perspective, the FTSE 100 has provided investors with a total return of around 3% per annum since January 2008.

Quality and value
If my investments are to outperform, I need to back companies that score well on several quality indicators and buy at prices that offer decent value.

So this series aims to identify appealing FTSE 100 investment opportunities, and today I'm looking at Burberry Group  (LSE: BRBY  ) , owner of the famous distinctive check-design brand and operator of dedicated retail outlets around the world.

With the shares at 1,335 pence, Burberry's market cap is 5,902 million pounds.

This table summarizes the company's recent financial record:

Year to March 2008 2009 2010 2011 2012
Revenue (million pounds) 995 1,202 1,185 1,501 1,857
Net cash from operations (million pounds) 45 210 369 265 374
Adjusted earnings per share (pence) 32.4 30.6 35.9 49.9 62.8
Dividend per share (pence) 12 12 14 20 25

In recent news, new Chief Operating Officer John Smith has started in the job, just after the release of the company's latest three-month report, covering the period to Dec. 31, 2012.

It's always nice to be part of a winning team, but Smith could have a hard act to follow judging by the strength of recent trading. Underlying revenue growth in the Asia-Pacific region came in at 16%; impressive enough, but all the more so given that 41% of overall sales came from the area in the quarter. Meanwhile, Europe, accounting for 27% of sales, grew at 4%, the Americas, with 26% of sales, grew at 4%, and the 12% sales in the rest of the world grew at 6%.

Burberry has a fine-tuned plan for growth, which aims to capture even more of that fast-growing Asian demand. As long as the ever-so-English check holds its fashion appeal, as it has for the past 160 years, the total-return prospects for Burberry shareholders continue to look attractive.

Burberry's total-return potential
Let's examine five indicators to help judge the quality of the company's total-return potential:

  1. Dividend cover: Adjusted earnings covered last year's dividend 2.5 times. 4/5
  2. Borrowings: At the last count, there was net cash on the balance sheet. 5/5
  3. Growth: Revenue and earnings have been growing with robust cash flow. 5/5
  4. Price to earnings: A forward 17 seems to price in growth and yield expectations. 3/5
  5. Outlook: Good recent trading and a positive outlook. 5/5

Overall, I score Burberry 22 out of 25, which encourages me to believe the company has potential to outpace the wider market's total return going forward.

Foolish summary
There isn't much to grumble about with regard to the scoring on the business-quality metrics. The valuation seems to price-in growth expectations; however, the outlook is encouraging.

I'm encouraged to buy Burberry on the dips along with a share that one of the Fool's top investment writers reckons is the "Motley Fool's Top Growth Share for 2013." In this new Fool report, you can discover how the company has re-envisioned itself to allow for tremendous growth along new horizons. Right now, the report is free to download and tells you exactly why our expert has invested in, and expects strong growth from, this changing company with a strong pedigree. To get your copy, click here.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2333472, ~/Articles/ArticleHandler.aspx, 10/22/2016 11:44:23 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 day ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 12:11 PM
BRBY $1494.87 Up +44.87 +3.09%
Burberry CAPS Rating: No stars