3 Reasons to Sell KTB and 1 Stock to Buy Instead

Kontoor Brands has gotten torched over the last six months - since November 2024, its stock price has dropped 24.2% to $69.53 per share. This might have investors contemplating their next move.

Is now the time to buy Kontoor Brands, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.

Why Is Kontoor Brands Not Exciting?

Even with the cheaper entry price, we're cautious about Kontoor Brands. Here are three reasons why there are better opportunities than KTB and a stock we'd rather own.

1. Constant Currency Revenue Hits a Standstill

Investors interested in Apparel and Accessories companies should track constant currency revenue in addition to reported revenue. This metric excludes currency movements, which are outside of Kontoor Brands’s control and are not indicative of underlying demand.

Over the last two years, Kontoor Brands failed to grow its constant currency revenue. This performance was underwhelming and implies there may be increasing competition or market saturation. It also suggests Kontoor Brands might have to lower prices or invest in product improvements to accelerate growth, factors that can hinder near-term profitability.

2. Projected Revenue Growth Is Slim

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Kontoor Brands’s revenue to rise by 12.5%. While this projection suggests its newer products and services will fuel better top-line performance, it is still below average for the sector.

3. EPS Barely Growing

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Kontoor Brands’s EPS grew at an unimpressive 9.4% compounded annual growth rate over the last five years. On the bright side, this performance was better than its 1.6% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.

Final Judgment

Kontoor Brands’s business quality ultimately falls short of our standards. Following the recent decline, the stock trades at 14.2× forward P/E (or $69.53 per share). Beauty is in the eye of the beholder, but we don’t really see a big opportunity at the moment. We're fairly confident there are better stocks to buy right now. Let us point you toward the Amazon and PayPal of Latin America.

Stocks We Like More Than Kontoor Brands

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