The idea to research my latest company came from a shopping trip with my girlfriend this past weekend to the outlet mall in National Harbor, Maryland. As I was following along store to store we made our way to the Fossil (FOSL -2.83%) outlet. When I arrived at the outlet store, I was pleasantly surprised to find very budget-friendly, high quality watches, handbags, and jewelry, and also, superior customer service.

After my experience I decided to look further into the business of Fossil, and I'm glad I did. Fossil seems to be a company with excellent growth priced more like a value company.

The growth story
We have recently been in one of the worst recessions since the Great Depression. Someone forgot to tell Fossil; their revenues have increased from $960 million in 2004 to $3.2 billion in 2013 , increasing every year except for a minor dip from 2008 to 2009. That is a 13% annual compounded growth rate for revenue, and good news, earnings have followed suit growing 15% a year from $91 million in 2004 to $378 million in 2013. Profit margins have averaged just below 10% for the same time period, and return on equity has averaged an outstanding almost 22%.

If those numbers aren't good enough, you need to check out earnings-per-share growth, which has averaged over 18% a year. How? Management has been buying back shares, and a lot of them, approximately $1.1 billion worth of share just over the last three years. In the latest 10-K currently available, Fossil's management commits to further share repurchases rather than dividends. Fossil top management appears willing to treat investors as well as front-line employees treat customers.

The value story
Fossil is currently selling at 18.4 times earnings, below an accessories industry average of 21.6 times earnings. Furthermore, during their latest earnings release, management gave full year earnings guidance for 2014 of $6.90 to $7.30 a share. At current prices that will give us a forward price to earnings ratio of 16.3 to 17.2. I suspect however that the numbers presented from management may be a touch on the conservative side. They represent earnings-per-share growth of 5% to 11%, which is quite a bit below the last ten years' growth rate. As always managers want to be conservative on their estimates, and that may make the forward price to earnings more appealing.

Where's the competition?
According to many investment sites, Nike and Adidas are listed as competitors against Fossil, however due to the scope of products and sales volume I think it would be more appropriate to compare Fossil to Michael Kors (CPRI -0.69%) or Coach (TPR -0.65%). Both companies are in the high-end accessory market, and have a very strong position in the womens' handbag market. Though Fossil is known more for their watches and has a price point slightly lower than these, it is more comparable, I believe. Michael Kors and Coach are selling for 33.3 and 13.9 times earnings, respectively. This puts Fossil's valuation somewhere in between.

Michael Kors is the largest of the three by market cap and they have shown explosive growth since they began publically reporting in 2010, when they had $39 million in earnings on $508 million of sales. They have reported earnings of $602 million on nearly $3 billion of sales in the latest twelve months. These growth figures may warrant the high price to earnings value.

Coach is the largest of the three by sales volume, and the company has been steadily growing earnings from $262 million to just over $1 billion over the last ten years, and along with Fossil appears to be a possible investment candidate.

Though Fossil is known for watches and Michael Kors and Coach are known for their handbags, all three sell watches, handbags, shoes, other jewelry, and clothing. Interestingly, even as competitors in parts of the market, Fossil is actually licensed to produce watches under the Michael Kors brand. Therefore, continued growth in Michael Kors will help out Fossil as well. Currently it appears that Fossil has a stronger footing in the mens segment, in which they also sell high quality leather wallets, along with watches. Both Michael Kors and Coach have mens product lines, but a quick look to their websites shows that they are smaller portions of their business. 

The point
It appears through the revenue and earnings numbers for Fossil, Michael Kors, and Coach that consumers are becoming more and more willing to spend money on high quality and stylish fashion accessories. To some, these brands represent class, yet affordability, which holds a special place in consumers' hearts and budgets.

Any of these companies may be intriguing investment options, but I believe Fossil is well positioned for growth because their price point is lower than some of the other players in this market and their already strong footing in the mens segment. This could help attract more consumers and market share as the world economy is still recovering from the recent recession. With their excellent customer service and investor-friendly management this company should maintain a strong image in retail stores and on Wall Street for the foreseeable future.

As always, when investing for the long term investors should look to buy pieces of companies for as cheap as possible. At 18.4 earnings, Fossil could be a good buy at this point, with continued purchases on any price dips.  This is a company that is well run and would be a nice addition to a portfolio.