Williams-Sonoma, Inc (NYSE: WSM), a consumer discretionary company with a market capitalization of $4.9 billion, saw its share price increase by 23.5% over the last month. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could shares still be trading at a relatively cheap price? Let’s take a look at Williams-Sonoma’s outlook and value based on its most recent financial data to see if there are any catalysts for a price change.
What’s The Opportunity In Williams-Sonoma?
According to our 12 valuation models, Williams-Sonoma seems to be fairly priced in the market at 5.9% below its intrinsic value. Meaning if you buy Williams-Sonoma today, you’d be paying a reasonable price for it. If you believe the company’s fair value is $64.88, then there’s not significant upside to be gained from mispricing.
|Analysis||Model Fair Value||Upside (Downside)|
|10-yr DCF Revenue Exit||$66.96||9.3%|
|5-yr DCF Revenue Exit||$71.98||17.5%|
|Peer Revenue Multiples||$77.47||26.5%|
|10-yr DCF EBITDA Exit||$70.60||15.2%|
|5-yr DCF EBITDA Exit||$77.54||26.6%|
|Peer EBITDA Multiples||$76.93||25.6%|
|10-yr DCF Growth Exit||$63.62||3.9%|
|5-yr DCF Growth Exit||$66.90||9.2%|
|Peer P/E Multiples||$64.50||5.3%|
|Dividend Discount Model||$36.05||-41.2%|
|Dividend Discount Model (multi-stage)||$35.40||-42.2%|
|Earnings Power Value||$70.65||15.3%|
Click on any of the analyses above to view the latest model with real-time data.
In addition, it seems like Williams-Sonoma’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its beta of 0.71.
Can We Expect Growth From Williams-Sonoma?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matters the most, a more compelling investment thesis would be high growth potential at a cheap price.
source: finbox.io data explorer
With Williams-Sonoma’s relatively muted net profit growth of 5.6% expected over the next five years on average, growth doesn’t seem like a key catalyst for a buying decision, at least in the short to medium-term.
What This Means For Investors
Growth investors typically look to invest in companies that are expanding sales, gaining market share and building customer bases. On the other hand, value investors often argue that the most successful investments are in companies that deliver the highest cash flows while trading at the lowest valuation.
But why not put those hands together? A company that has both growth and value characteristics would certainly make the most attractive investment. So what did we find out about Williams-Sonoma?
Williams-Sonoma’s future growth is relatively low and the stock appears fairly valued at the moment according to our valuation models. As a shareholder, you may have already conducted your fundamental analysis on the company and the stock’s recent appreciation may have been expected. Therefore, it may be time for investors to take some chips off the table. For prospective investors looking to purchase shares of Williams-Sonoma, it may be worth holding off until the stock develops a larger margin of safety.
It is important to note that there are a variety of other fundamental factors that I have not taken into consideration in this article. If you have not done so already, I highly recommend that you complete your research on Williams-Sonoma by taking a look at the following:
Valuation Metrics: how much upside do shares of Williams-Sonoma have based on Wall Street’s consensus price target? Take a look at our analyst upside data explorer that compares the company’s upside relative to its peers.
Risk Metrics: how is Williams-Sonoma’s financial health? Find out by viewing our financial leverage data metric which plots the dollars in total assets for each dollar of common equity over time.
Efficiency Metrics: is management becoming more or less efficient over time? Find out by analyzing the company’s asset turnover ratio which measures the dollars in revenue a company generates per dollar of assets.
As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.