Winmark (WINA) Dividend Boost and Earnings: What Do the Numbers Say About Its Valuation?

Winmark (WINA) just announced third-quarter results along with two shareholder-friendly moves. Its Board approved both a regular dividend and a one-time special dividend. These decisions underscore the company's ongoing profitability.

See our latest analysis for Winmark.

Following the upbeat earnings and the twin dividend announcements, Winmark’s momentum is still catching investors’ eyes. The company’s share price is up 11.95% year-to-date and has climbed 16.34% over the last 90 days, which suggests confidence is building. Even more notably, total shareholder return over the past 12 months reached 16.33%. Long-term holders have seen outstanding gains with a 101% three-year and 197% five-year total return.

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With strong dividend payments and a notable run-up in total returns, the spotlight now turns to valuation. Is Winmark’s current share price offering investors a real bargain, or has the market already priced in its growth story?

Price-to-Earnings of 37.7x: Is it justified?

Winmark's current price-to-earnings (P/E) ratio stands at a lofty 37.7x, making its last close price look steep compared to both the broader US market and industry peers.

The price-to-earnings ratio measures what investors are willing to pay today for a dollar of earnings. For a company like Winmark, this is a key gauge of expectations for sustained profit growth and future returns.

However, Winmark's P/E ratio of 37.7x is nearly double the US Specialty Retail industry average of 16.1x. This highlights a premium the market is placing on the stock. Compared to its own fair price-to-earnings estimate of 12.8x, the current valuation appears even more stretched and suggests the market is factoring in extremely optimistic expectations relative to underlying fundamentals.

Explore the SWS fair ratio for Winmark

Result: Price-to-Earnings of 37.7x (OVERVALUED)

However, slower revenue growth or a reversal in net income momentum could challenge the bullish case and limit further upside for Winmark’s share price.

Find out about the key risks to this Winmark narrative.

Another View: What Does the SWS DCF Model Say?

Another way to assess Winmark's share price is by using the SWS DCF model, which estimates a company's intrinsic value by forecasting future cash flows. According to our DCF model, Winmark is trading well above its fair value estimate of $308.22 per share. This suggests it could be overvalued. Does this mean the market is too optimistic, or are there unseen growth opportunities on the horizon?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Winmark for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Winmark Narrative

If you feel differently about Winmark or want to reach your own conclusions, you can review the numbers and build your own perspective in just a few minutes. Then Do it your way

A great starting point for your Winmark research is our analysis highlighting 2 key rewards and 4 important warning signs that could impact your investment decision.

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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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