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How Bed Bath & Beyond’s Valuation Compares with Peers’

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Valuation multiple

Strong 2019 guidance from Bed Bath & Beyond’s (BBBY) management—and investors’ optimism about the company’s announcement that it would change its composition, governance structure, and compensation practices—led the stock price to rise since the beginning of this year. The surge in BBBY’s stock price led to an increase in its valuation multiple. As of May 10, the company was trading at a forward price-to-earnings multiple of 7.8x, compared to 6.8x at the beginning of this year.

On the same day, peers Williams-Sonoma (WSM) and RH (RH) were trading at forward PE multiples of 11.8x and 11.7x, respectively. Negative same-store sales growth and lower margins have allowed BBBY to trade below peers’ valuation multiples.

BBBY is also trading at 8.0 times analysts’ 2019 EPS estimate of $1.98 and 7.2 times analysts’ 2020 EPS estimate of $2.20. Its EPS are expected to fall 3.7% in 2019 and rise 11.4% in 2020.

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Analysts’ recommendations

Of the total 22 analysts who follow BBBY, 9.1% have a “buy” rating while 72.7% have a “hold” rating and 18.2% have a “sell” rating. On average, analysts have given BBBY a 12-month price target of $17.87, which represents an upside potential of 13.4% from its stock price of $15.76 on May 10.

Peer comparisons

Of the 25 analysts covering WSM, 4.0% have a “buy” rating while 76% say “hold” and the remaining 20% say “sell.” Analysts have given WSM a 12-month price target of $56.41, which implies an upside potential of 2.8% from its stock price of $54.86.

Of the total 22 analysts covering RH, 36.4% say “buy” while 54.5% say “hold” and 9.1% say “sell.” Analysts’ 12-month price target for RH stands at $137.31, which represents a return potential of 33.5% from its stock price of $102.87.

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