Image source: Getty Images If I had bought Burberry (LSE:BRBY) shares a year ago, I would’ve gained 22% excluding dividends. This would’ve allowed my money to outstrip inflation handsomely. So, with another positive outlook in its most recent Q3 update, I believe the stock can continue generating an inflation-beating return. Unfashionable numbers? MetricsConsensusQ3 2023Q3 2021Retail revenue£777m£756m£723mComparable store sales growth1%1%7%Data source: Burberry Despite just missing analysts’ estimates in its most recent trading update, there were plenty of positive takeaways from Britain’s unique luxury company. Although comparable store sales growth showed barely any movement, stripping China out of the figures show a clearer picture of the firm’s underlying performance. In fact, in the three quarters reported in FY23 thus far, Burberry’s sales excluding China have grown by double digits. And despite China being the group’s Achilles’ heel in 2022, the road ahead is anticipated to be smoother. Outgoing COO Julie Brown is bullish on the country’s prospects and cited a number of catalysts for a strong rebound: Net household deposits to nearly 12.5trbn RMB in 2022, 3.5 times in 2020.Government stimulus should encourage spending as interest rates remain relatively low versus other countries.Chinese nationals make up 40% of Burberry’s revenue. In 2022, this figure was only 25% due to lockdowns. As a result, the board has reiterated its outlook of single-digit revenue growth and 70% gross margin for the full-year, while holding its medium-term guidance of £4bn in revenue as well. Checking for authenticity Nonetheless, the biggest takeaway from the report was customers gravitating towards higher priced items. These include bags and leather goods. More notably, products with Burberry’s British checks and styles saw better performance. For instance, its trademark chequered scarf constituted 60% of soft accessory sales. This is key to the FTSE 100 stalwart’s long-term growth. Management is aware that in order for Burberry to mark up prices and expand its margins, it’ll have to be authentic and stick to its roots — its Britishness. As such, new CCO Daniel Lee is expected to push this aesthetic in his new line of products next month. Premium valuation? So, with strong tailwinds as China reopens, a decent dividend yield, and a robust balance sheet, should I invest in Burberry shares? Well, the upside potential is certainly there, and City Index analyst Joshua Warner shares the same sentiment. He’s forecasting comparable sales growth to grow about 7.3% in Q4, with retail sales jumping above 9%. That being said, it’s also worth noting that Burberry shares are trading on rather pricey valuation multiples. MetricsValuation multiplesIndustry averagePrice-to-earnings (P/E) ratio20.726.5Price-to-sales (P/S) ratio3.11.5Price-to-book (P/B) ratio5.43.0Price-to-earnings growth (PEG) ratio0.60.1Data source: YCharts Therefore, it’s no surprise to see the current Burberry share price higher than most price targets originally set out by banks. This is because price targets only have a one-year time horizon. For that reason, the tailwinds of China’s reopening and Daniel Lee’s new collection haven’t been appropriately priced in. After all, Lee’s collection will only hit shelves from September onwards. This means that any increase in revenue from better products and designs will only be realised in H2 of FY24. Having previously sold the stock as it hit my price target, the rebasing of my model suggests further upside, which is why I’ll be buying Burberry shares in due course.

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