I'm a naturally suspicious person. So when things are always going awesomely, I start to wonder what's secretly wrong. For instance, Michael Kors (NYSE:KORS) is a perfect example of a company that I used to love and now feel a bit worried about. Considering that Kors' stock is up 60% over the last 12 months, with almost no large setbacks, it's a natural thing for me to worry about. The company can seemingly do no wrong, and even when the world around it seems to be falling apart, it puts up 40% or more comparable sales growth. So with fourth-quarter earnings coming out on Wednesday, what should investors be looking out for?
The steep climb to the top
When I say things are always going Kors' way, I'm being a little selective in my reference. While the stock is up 60% over the past 12 months -- easily beating the S&P 500 -- it's up only 17% over the past six months, putting it right in line with the S&P 500. For six months now, Kors has sort of been coasting along, increasing sales, but ripping big wins away from investors.
The company's problem is that its management team seems bent on ditching as much of its holdings as possible. Michael Kors himself-- the man, the legend -- is now down to less than 3% of the company. While there's an argument to be made for selling shares, there's almost no doubt that insider selling has hurt the company. The stock peaked around $65 in February and then plummeted the day the company announced its most recent "secondary offering" -- it hasn't recovered yet.
Two steps forward and one back still moves you forward
Even with the sell-off setback, Kors is still on a roll. The company's nearest competitor, Coach (NYSE:TPR), has lost 3% of its value over the same six months. The company failed to grow its core business in the U.S. over its second quarter, which hammered the stock.
Kors has had only good surprises. Over the past five quarters -- all of the quarters that Kors has been publicly traded -- Kors has dropped a positive surprise in earnings per share. If that system keeps up, then Kors will easily beat its $0.37 earnings estimate. In its last release, Kors also forecast mid-20% comparable sales growth. That also looks likely to be beaten, and anything below 30% would be surprising to me.
The bottom line
In short, expect Kors to do better than analysts expect. I'd like to see some discussion about the insider selling, but that's a long shot at the very best. The only other thing I'd be on the lookout for is mention of the company's market share in the United States. Coach showed some weakness earlier, and if Kors has capitalized, then it could me bad things for Coach investors further down the line.
Fool contributor Andrew Marder has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Coach. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.