Interparfums Inc (NASDAQ:IPAR) Passes the Peter Lynch Screen

The investment philosophy created by Peter Lynch has long been a guide for investors looking to build wealth through a disciplined, long-term method. Central to this strategy is the idea of “Growth at a Reasonable Price,” or GARP, which focuses on finding companies that show consistent earnings growth without having excessive valuation premiums. Lynch’s method highlights sustainable expansion, financial health, and profitability, filtering out companies with unstable growth paths or weak balance sheets. This framework gives a systematic way to assess potential investments for a buy-and-hold portfolio.

Meeting the Lynch Criteria

Interparfums Inc (NASDAQ:IPAR) appears as a noteworthy candidate when measured against the key filters of the Peter Lynch screen. The company’s financial numbers match closely with the strategy’s needs for sustainable growth and sound valuation.

• Earnings Per Share Growth: The screen requires a 5-year EPS growth between 15% and 30% to make sure growth is strong yet sustainable. Interparfums meets this with a 5-year EPS growth rate of 22.27%, placing it directly in the desired range Lynch supported.
• PEG Ratio: An important Lynch valuation measure, the PEG ratio (Price/Earnings to Growth) should be at or below 1.0. With a PEG ratio of 0.83, IPAR is seen as fairly priced relative to its past earnings growth, a signal that investors are not paying too much for its expansion.
• Financial Health: The strategy favors companies with solid balance sheets.
  • The Debt-to-Equity ratio of 0.24 is well under the screen’s limit of 0.6 and also meets Lynch’s stricter preference for a ratio under 0.25, showing little dependence on debt financing.
  • A Current Ratio of 2.96 is much higher than the required minimum of 1.0, showing enough liquidity to meet short-term obligations.
• Profitability: A Return on Equity (ROE) above 15% is required to make sure efficient use of shareholder capital. Interparfums delivers on this with an ROE of 19.18%, showing good profitability.

Fundamental Health Overview

A detailed fundamental analysis of Interparfums supports the findings from the Lynch screen, giving the company an overall rating of 6 out of 10. The analysis points out several areas of strength, especially in profitability and financial health, which create a stable base for a long-term investment. The company gets high scores for its profit margins and returns on capital, doing better than a large portion of its peers in the Personal Care Products industry. Its solvency is strong, with a high Altman-Z score showing low risk of financial trouble. While the valuation is seen as fair and not too costly compared to the industry, the report mentions that future growth expectations have become more moderate compared to the solid past performance.

A Business in Everyday Life

Lynch famously told investors to “invest in what you know,” suggesting that the best investment ideas often come from noticing products and brands seen in daily life. Interparfums operates directly within this idea. As the company behind a varied collection of well-known fragrance brands including Coach, Jimmy Choo, Montblanc, and Lacoste, its products are available and familiar to a global consumer audience. The company’s business model, creating and distributing fragrances under license with established fashion houses, is simple and easy to understand, another quality Lynch appreciated. This wide brand awareness and distribution in over 120 countries give a real link between the consumer experience and the investment case.

Conclusion

For investors following the GARP philosophy, Interparfums Inc makes a strong case based on the disciplined criteria of the Peter Lynch strategy. The company shows the characteristics of what Lynch looked for: sustainable past earnings growth, a fair valuation when measured by the PEG ratio, a conservatively managed balance sheet with little debt, and high profitability. While future growth is expected to be more modest, the company’s fundamental health and strong brand collection offer a noteworthy profile for a long-term, diversified portfolio.

To see other companies that currently pass the Peter Lynch screen, you can review the latest results here.

Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation, or an offer to buy or sell any securities. All investments carry risk, and past performance is not indicative of future results. Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions.