Evaluating National Vision After Recent 11.5% Dip and Strong Yearly Performance

Thinking about what to do with National Vision Holdings stock? You are not alone. Plenty of investors have been watching this name after its dramatic ride, whether rounding off a year-to-date return of 137.3% or glancing at a jaw-dropping 154.6% climb over the last twelve months. This stock has definitely been on a tear lately. But it is not all blue skies, as the last week has seen the shares slip by 11.5%, giving some folks pause about whether the growth has gotten ahead of itself or if there are new risks bubbling up.

This recent surge in momentum follows broader shifts within the retail health sector, where several competitors have seen renewed interest from market participants eager to bet on evolving consumer trends. However, National Vision’s longer-term results remind us this is not a straight shot upward. Long-term holders still see their five-year return in the red at -37.4%, and the three-year tally rests at -20.4%.

So, is now the time to buy, or a signal to be cautious? Let us break it down with a look at the numbers. By our tally, National Vision Holdings scores a 3 out of 6 on key undervaluation checks. This tells us the stock might be offering some hidden value, but it is not screamingly cheap either. Up next, we will take a closer look at exactly what goes into that value score and why just ticking boxes may miss the bigger story. Stick around for an even better way to assess whether this stock fits your own investing playbook.

National Vision Holdings delivered 154.6% returns over the last year. See how this stacks up to the rest of the Specialty Retail industry.

Approach 1: National Vision Holdings Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model is a widely used method for valuing companies. It works by estimating how much cash the company is expected to generate in the future and then discounting those cash flows back to today's value. This approach gives investors a sense of the business's intrinsic worth based on projected performance, rather than just current earnings or assets.

For National Vision Holdings, the DCF model uses Free Cash Flow (FCF) forecasts to build its case. The company’s latest twelve months saw a FCF of $42.6 million. Looking ahead, analysts project this figure to reach $76.7 million by 2026, based on their published estimates. For the years beyond the five-year analyst forecast window, additional years are extrapolated using expected growth rates. Ten-year projections show figures climbing as high as $171.2 million in 2035. All cash flow figures are calculated in US dollars.

Based on these projections, the estimated intrinsic value of National Vision Holdings is $25.83 per share. Compared to the current share price, this suggests the stock trades at about a 1.0% discount to its fair value. In other words, the DCF calculation implies the market price is fairly close to the business's estimated worth today.

Result: ABOUT RIGHT

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for National Vision Holdings.

Simply Wall St performs a valuation analysis on every stock in the world every day (check out National Vision Holdings's valuation analysis). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes.

Approach 2: National Vision Holdings Price vs Sales

The Price-to-Sales (PS) ratio is often a go-to metric for valuing companies in the retail sector, especially when profits can be unpredictable or negative. This measure is useful for companies like National Vision Holdings, since it values the business based on its ability to generate sales. Sales figures tend to be a more stable indicator than earnings in rapidly evolving retail environments.

Growth prospects and company risks play a major role in determining what constitutes a "normal" or fair PS ratio. Fast growth or superior margins typically justify higher PS multiples, while higher business risks or industry challenges could lower that fair bar. When comparing National Vision’s current PS ratio of 1.07x to the Specialty Retail industry average of 0.44x and the peer average of 4.94x, the stock sits above the industry mean but appears modest next to peers.

To go a step further, Simply Wall St’s proprietary "Fair Ratio" tool helps determine what PS multiple the company truly deserves by factoring in not just sales and margins, but also growth forecasts, risks, profitability, industry dynamics, and the company’s market size. This offers a more tailored and relevant benchmark than raw industry or peer averages.

For National Vision Holdings, the Fair Ratio is calculated at 1.08x. Since this is extremely close to the company’s current PS of 1.07x, it suggests the stock is being valued almost exactly in line with its fundamentals, risk profile, and prospects.

Result: ABOUT RIGHT

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your National Vision Holdings Narrative

Earlier, we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is your personal investing story, combining your view of the company’s future, including its growth, risks, and opportunities, with the financial forecasts and fair value you believe are most realistic. Instead of simply focusing on raw numbers or analyst targets, Narratives help you connect what you know about a business (like trends in digital eye care or managed care expansion) to actual revenue, profit margin, and price forecasts. This makes every decision anchored in both insight and numbers.

This powerful approach is now easy and accessible within the Simply Wall St Community page, used by millions of investors. Narratives let you revisit your investment thesis over time, see how your fair value compares to the latest share price, and react quickly if new information changes the outlook. For example, one investor might build a bullish Narrative for National Vision Holdings, seeing digital trends and managed care growth justifying a fair value of $36.00 per share. Another, more cautious investor might focus on competition and operational risks, setting their fair value closer to $22.00. Your Narrative puts the story and your decisions exactly where they belong: in your hands, supported by data that updates as the market evolves.

Do you think there's more to the story for National Vision Holdings? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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