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How Williams-Sonoma’s Valuation Multiple Compares to Its Peers’

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Valuation multiple

Along with its impressive first-quarter earnings, Williams-Sonoma’s (WSM) compelling offerings and differentiated customer experiences appear to have increased investors’ confidence, raising its stock price. The surge of 24.6% in its stock has also hiked its valuation multiple. On June 27, the company was trading at a forward PE multiple of 13.5x compared to 11.0x before the announcement of its first-quarter earnings. In comparison, WSM’s peers Bed Bath & Beyond (BBBY) and RH (RH) were trading at forward PE multiples of 5.6x and 11.9x, respectively.

On June 27, WSM was trading at 13.7 times analysts’ 2019 EPS estimate of $4.70 and 13.2 times analysts’ 2020 EPS estimate of $4.89, with its EPS expected to rise 4.9% in 2019 and 4.4% in 2020.

Analysts’ recommendations

Since WSM reported its first-quarter earnings results, UBS, Citigroup, RBC, Jefferies, Deutsche Bank, and Morgan Stanley have all raised their price targets on its stock. Earlier this month, Deutsche Bank hiked its price target from $60 to $61, while Morgan Stanley increased its price target from $49 to $52.

Analysts are favoring “holds” for WSM, with 75% of the 24 analysts that follow the stock giving it “hold” ratings, 8.3% giving it “buys,” and 16.7% giving it “sells.” On average, analysts have given WSM a 12-month price target of $58.53, which implies a fall of 8.9% from its current price of $64.26.

Peer comparison

Of the 21 analysts that cover RH (RH), 57.1% have given the stock “hold” ratings, while 38.1% are favoring “buy” ratings, and 4.8% are favoring “sells.” On average, analysts have a 12-month price target of $136.21 on the stock, which implies a potential upside of 21.1% from its current price of $113.46. RH stock has been on an upward trajectory since it reported impressive first-quarter earnings results on June 12. You can read more about RH’s stock performance in RH Is Up ~21% since Reporting Its Earnings: Is There More Upside?

Of the 21 analysts that are covering Bed Bath & Beyond (BBBY), 76.2% are in favor of a “hold” rating, while 9.5% are recommending a “buy” rating, and the remaining 14.3% are advocating a “sell” rating. On average, analysts’ 12-month price target for BBBY stands at $17.86, which implies an upside potential of 55.7%.

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