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.

Article continues below advertisement

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.

Growth expectations

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.


More From Market Realist