Where Does Nordstrom’s Valuation Stand?
12-month forward PE
As of September 15, Nordstrom (JWN) was trading at a 12-month forward PE (price-to-earnings) ratio of 15.5x. The company’s valuation multiple has risen 3.9% since the announcement of its fiscal 2Q17 results in August 2017. The upscale department store chain beat analysts’ revenue and earnings expectations for fiscal 2Q17.
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Comparison with peer group
As of September 15, Macy’s (M), Kohl’s (KSS), and JCPenney (JCP), Nordstrom’s rivals in the department store sector, were trading at 12-month forward PEs of 7.7x, 12.1x, and 10.6x, respectively. These department store stocks are trading at lower valuation multiples compared to the S&P 500 Index with a forward PE of 18.1x. The forward PE ratio varies among companies based on many parameters like growth expectations and risk-return profile.
Analysts expect Nordstrom’s revenue to rise 3.9% to $15.3 billion in fiscal 2017. The company’s adjusted EPS (earnings per share) are expected to fall 2.3% to $2.97. Nordstrom’s bottom line is likely to be under pressure due to higher technology and supply chain expenses associated with the company’s growth initiatives.
Analysts’ expectations for Nordstrom’s top-line growth are better than the growth estimates for its peers. Currently, analysts expect Macy’s, Kohl’s, and JCPenney’s top line to fall 4.1%, 0.6%, and 1.5%, respectively, in fiscal 2017.
Based on the guidance issued in August 2017, Nordstrom expects its net retail sales to rise ~4.0% in fiscal 2017. The company expects its same-store sales to be unchanged in fiscal 2017 compared to the previous year. Nordstrom expects its EPS to be in the $2.85 to $3.00 range in fiscal 2017.
We’ll look at analyst recommendations for Nordstrom stock in the next part of this series.