With a recent daily loss of 1.74% and a 3-month gain of 9.44%, Bath & Body Works Inc (BBWI, Financial) presents an interesting case for valuation analysis. The company's Earnings Per Share (EPS) of 3.85 is a key metric for investors. The pressing question remains: is Bath & Body Works Inc (BBWI) fairly valued? The following analysis aims to answer this question by delving into the company's fair value as estimated by the proprietary GF Value metric.
Company Overview
Bath & Body Works Inc (BBWI, Financial) is a leading specialty retailer known for its home fragrances and fragrant body care products. Operating primarily in North America, the company has a significant brick-and-mortar presence with over 1,800 retail stores. With 74% of sales generated through physical stores, Bath & Body Works has maintained a consistent consumer shopping pattern. The company's future growth is anticipated to stem from store reformatting, digital and international expansion, and exploring adjacent categories. At a current stock price of $47.41 and a market cap of $10.70 billion, Bath & Body Works is positioned as a major player in the retail sector. The GF Value of $43.54 provides a benchmark for evaluating the stock's fair value.
Understanding GF Value
The GF Value is a unique measure of intrinsic value, incorporating historical trading multiples, an adjustment factor based on past performance, and future business performance estimates. Bath & Body Works Inc (BBWI, Financial) is currently considered fairly valued according to the GF Value, which suggests that the stock's long-term return should align closely with its business growth rate.
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Financial Strength
Investors must consider a company's financial strength to avoid potential capital loss. Bath & Body Works has a cash-to-debt ratio of 0.2, which is lower than 69.15% of its peers in the Retail - Cyclical industry. This positions the company's financial strength at a fair level, with a GuruFocus ranking of 5 out of 10.
Profitability and Growth
Profitability is less risky and often indicative of performance potential. Bath & Body Works has shown profitability for 9 out of the past 10 years. With a strong operating margin of 17.31%, the company outperforms 91.42% of its industry competitors. However, when it comes to growth, the company's average annual revenue growth is 12.3%, with a 3-year average EBITDA growth of -1.1%, indicating mixed performance in the Retail - Cyclical industry.
ROIC vs WACC
Comparing Return on Invested Capital (ROIC) and Weighted Average Cost of Capital (WACC) offers insights into value creation. Bath & Body Works' ROIC of 30.93 significantly exceeds its WACC of 10.69, indicating the company's effectiveness in generating cash flow relative to capital invested.
Conclusion
In summary, Bath & Body Works Inc (BBWI, Financial) appears to be fairly valued with respect to its market cap and GF Value. The company's fair financial condition and strong profitability are noteworthy, although growth prospects show room for improvement. For a deeper understanding of Bath & Body Works' financials, investors can explore the company's 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
