Bath & Body Works, Inc. - NYSE:BBWI - Comprehensive analysis
We find the shares of Bath & Body Works to be attractive, currently trading at approximately a 50% discount to our fair value estimate of $61. The company possesses a strong competitive advantage in the substantial addressable markets it serves. Its robust brand intangible asset is reinforced by its leading position in the bath and shower, as well as the candle and air freshener sectors, particularly due to its swift adaptation to consumer trends. The company's narrow moat is reflected in the anticipated 34% average return on invested capital, excluding goodwill, over the next decade, significantly surpassing our 8% weighted average cost of capital estimate. While we project limited growth in its North American footprint, with nearly 1,900 owned stores already established, we expect that product innovation and enhancements in store formats will drive both top- and bottom-line growth over time. Additionally, improvements in omnichannel strategies, such as buy online and pick up in store, are expected to remain integral, alongside loyalty program updates that will enhance conversion rates and profit potential. The company's emphasis on international expansion is likely to benefit both its physical and digital channels, projecting an average international sales growth of 6% over the next decade. This strategy will aid Bath & Body Works in enhancing its brand intangible asset on a global scale. We anticipate that these opportunities will contribute to an average sales growth of 3% in the long term, aligning with global growth forecasts (according to Euromonitor) for the bath and shower and soap industries. Consequently, this will lead to additional market share gains for Bath & Body Works, further solidifying its already dominant position.
Free evaluation through quantitative algorithms Bath & Body Works, Inc. - NYSE:BBWI
Growth-Scoring Model Detail
Total Revenue Growth Over Prior Year | -0.18 | Market 19 Sector 40 |
Gross Profit Growth Over Prior Year | 1.14 | Market 31 Sector 45 |
EBITDA Growth Over Prior Year | -2.36 | Market 21 Sector 39 |
EBITA Growth Over Prior Year | -1.79 | Market 24 Sector 42 |
EBIT Growth Over Prior Year | -1.79 | Market 27 Sector 44 |
Earnings from Cont. Ops. Growth Over Prior Year | -22.31 | Market 17 Sector 26 |
Net Income Growth Over Prior Year | -22.31 | Market 19 Sector 26 |
Normalized Net Income Growth Over Prior Year | -0.4 | Market 32 Sector 49 |
Diluted EPS before Extra Growth Over Prior Year | -18.32 | Market 19 Sector 28 |
A/R Growth Over Prior Year | -10.27 | Market 8 Sector 26 |
Inventory Growth Over Prior Year | 13.21 | Market 87 Sector 79 |
PPE Net Growth Over Prior Year | -4.57 | Market 10 Sector 35 |
Total Assets Growth Over Prior Year | -2.71 | Market 14 Sector 36 |
Tangible Book Value Growth Over Prior Year | 0 | Market 0 Sector 0 |
Common Equity Growth Over Prior Year | 0 | Market 0 Sector 0 |
Cash from Ops. Growth Over Prior Year | 10.36 | Market 62 Sector 64 |
CAPEX Growth Over Prior Year | -1.36 | Market 40 Sector 52 |
Dividend per Share Growth Over Prior Year | 0 | Market 35 Sector 44 |
Levered Free Cash Flow Growth Over Prior Year | -2.42 | Market 38 Sector 43 |
Unlevered Free Cash Flow Growth Over Prior Year | -4.6 | Market 35 Sector 40 |
Profitability-Scoring Model Detail
Gross Margin % | 44.6 | Market 53 Sector 64 |
SG&A Margin % | 27.5 | Market 79 Sector 52 |
EBITDA Margin % | 20.8 | Market 39 Sector 83 |
EBITA Margin % | 17.13 | Market 40 Sector 82 |
EBIT Margin % | 17.13 | Market 43 Sector 84 |
Earnings from Cont. Ops Margin % | 9.88 | Market 36 Sector 80 |
Net Income Margin % | 9.88 | Market 37 Sector 81 |
Net Income Avail. for Common Margin % | 9.88 | Market 37 Sector 81 |
Normalized Net Income Margin % | 8.51 | Market 38 Sector 82 |
Levered Free Cash Flow Margin % | 8.33 | Market 44 Sector 74 |
Unlevered Free Cash Flow Margin % | 10.8 | Market 48 Sector 76 |
Return on Assets % | 16.17 | Market 94 Sector 99 |
Return on Capital % | 22.3 | Market 92 Sector 97 |
Return on Equity % | 0 | Market 0 Sector 0 |
Return on Common Equity % | 0 | Market 0 Sector 0 |
Total Asset Turnover | 1.51 | Market 94 Sector 83 |
