Buy These 2 Diamond Retail Stocks to Make Your Portfolio Shine

As diamond prices continue to rise on increasing industrial and non-industrial demand, we think it could be wise to bet on fundamentally sound diamond retail stocks Signet Jewelers (SIG) and Brilliant Earth (BRLT). These stocks are rated ‘Buy’ or ‘Strong Buy’ in our proprietary rating system. Let’s discuss.

Diamond prices have been soaring over the past few months amid rising inflation and supply chain constraints. According to an IndexBox report, diamond prices climbed 0.9% month-over-month in September 2021 due to strong demand for jewelry and limited supply. According to a De Beers group report, sustainability is expected to shape the future of the diamond industry as consumers grow more concerned about sustainability issues.

The diamond industry is also likely to grow in the near term because of increased diamond jewelry demand and its increasing industrial uses, which include cutting, drilling, and grinding. According to a Reports and Data report, the global diamond market is expected to reach $113.63 billion by 2027.

Given this backdrop, we think it could be wise to scoop up shares of quality diamond retail stocks Signet Jewelers Limited (SIG) and Brilliant Earth Group, Inc. (BRLT).

Signet Jewelers Limited (SIG)

The world's largest retailer of diamond jewelry and the largest specialty jewelry retailer in the U.S., UK, and Canada, SIG’s offerings include engagement rings. The Hamilton, Bermuda-based company operates roughly 2,800 stores under various brand names, namely Kay Jewelers, Zales, Jared, H.Samuel, Ernest Jones, and Peoples Jewellers.

On October 12, 2021, SIG announced its agreement to acquire Diamonds Direct USA Inc. SIG’s CEO Virginia C. Drosos said, “The accretive addition of Diamonds Direct to our portfolio will further drive shareholder value with its distinct bridal-focused shopping experience and add a new entry point as we build lifetime customer relationships and strive to reach our $9 billion revenue goal over time.”

For its fiscal second quarter, ended July 31, 2021, SIG’s sales increased 101.4% year-over-year to $1.79 billion. The company’s income from operations came in at  $225.40 million, versus a $89.70 million loss in the previous year. Its net income was  $216 million compared to a $90.0 million loss in the year-ago period. Also, its EPS was  $3.60 compared to a $1.73 loss per share in the prior year’s quarter.

For its fiscal 2022, SIG’s revenue and EPS are expected to grow 36.7% and 381.3%, respectively, year-over-year to $7.15 billion and $10.16.In addition, it surpassed the consensus EPS estimates in each of  the trailing four quarters. Over the past month, the stock has gained 19.1% to close yesterday’s trading at $101.65.

SIG’s strong fundamentals are reflected in its POWR ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

In addition, it has an A grade for Growth, Momentum, and Quality, and a B grade for Value. SIG is ranked #5 out of 63 stocks in the Fashion & Luxury industry. The stock is also graded for Stability and Sentiment. Click here to see all the SIG ratings.

Brilliant Earth Group, Inc. (BRLT)

BRLT, together with its subsidiaries, designs, procures, and retails diamonds, gemstones, and jewelry in the United States and internationally. It has around 13 showrooms across nine states and Washington D.C. BRLT is based in San Francisco.

BRLT made its stock market debut on September 23, 2021. Beth Gerstein, the company’s co-founder and CEO, said, “Brilliant Earth’s IPO was an important milestone in our company’s history, and I want to thank all of our employees, whose passion and dedication have built Brilliant Earth into the brand it is today. And we are only at the beginning of this exciting journey to modernize and create a more transparent, sustainable and compassionate jewelry industry in the years ahead.”

BRLT’s net sales increased 33.3% year-over-year to $95.24 million for its fiscal third quarter, ended September 30, 2021. The company’s gross profit came in at $48.02 million, up 55.7% year-over-year. Furthermore, its income from operations came in at $9.87 million, representing a 5.9% year-over-year rise.

Analysts expect BRLT’s revenue to be $470.52 million in its fiscal 2022, representing a 27.5% year-over-year rise. The company’s EPS is expected to increase 97.5% year-over-year to $0.33 in its fiscal 2022. Over the past month, the stock has gained 34.7% in price to close yesterday’s trading session at $18.79.

BRLT’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our POWR Rating system. Also, the stock has an A grade for Momentum and Sentiment, and a B grade for Value and Quality.

Click here to see BRLT’s ratings for Growth and Stability also.  BRLT is ranked #36 in the  Fashion & Luxury industry.

SIG shares were trading at $104.41 per share on Tuesday morning, up $2.76 (+2.72%). Year-to-date, SIG has gained 284.73%, versus a 26.85% rise in the benchmark S&P 500 index during the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.


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