In This Article:
Future Lifestyle Fashions Limited (NSE:FLFL), a ₹82.33b small-cap, operates in the retail industry impacted by the digital transformation for all retail channels. Physical store retailers faced the inevitable challenge of building up an online presence in order to enhance their omnichannel capabilities. Retail analysts are forecasting for the entire industry, an extremely elevated growth of 31.06% in the upcoming year , and a whopping growth of 84.24% over the next couple of years. This rate is larger than the growth rate of the Indian stock market as a whole. Today, I will analyse the industry outlook, as well as evaluate whether Future Lifestyle Fashions is lagging or leading its competitors.
Check out our latest analysis for Future Lifestyle Fashions
What’s the catalyst for Future Lifestyle Fashions’s sector growth?
E-commerce continues to be the fastest growing sales platform for consumer goods, changing the landscape for retailers. A large number of store closures and bankruptcies illustrates the shift in consumer preferences and increasing online competition. In the previous year, the industry saw growth in the twenties, beating the Indian market growth of 20.55%. Future Lifestyle Fashions leads the pack with its impressive earnings growth of 65.66% over the past year. However, analysts are not expecting this industry-beating trend to continue, with future growth expected to be 28.33% compared to the wider retail sector growth hovering in the thirties next year. As a future industry laggard in growth, Future Lifestyle Fashions may be a cheaper stock relative to its peers.
Is Future Lifestyle Fashions and the sector relatively cheap?
The retail sector’s PE is currently hovering around 24.51x, relatively similar to the rest of the Indian stock market PE of 20.35x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. Furthermore, the industry returned a similar 10.62% on equities compared to the market’s 10.18%. On the stock-level, Future Lifestyle Fashions is trading at a higher PE ratio of 63.86x, making it more expensive than the average retail stock. In terms of returns, Future Lifestyle Fashions generated 8.24% in the past year, which is 2.37% below the retail sector.
Next Steps:
Future Lifestyle Fashions is a retail industry laggard in terms of its future growth outlook. In addition to this, the stock is trading at a PE above its peers, meaning it is more expensive on a relative earnings basis.If Future Lifestyle Fashions has been on your watchlist for a while, now may not be the best time to enter into the stock. If growth and mispricing are important aspects for your investment thesis, there may be better investments in the retail sector. However, before you make a decision on the stock, I suggest you look at Future Lifestyle Fashions’s fundamentals in order to build a holistic investment thesis.