At US$37.61, Is It Time To Put Bath & Body Works, Inc. (NYSE:BBWI) On Your Watch List?

Bath & Body Works, Inc. (NYSE:BBWI), might not be a large cap stock, but it led the NYSE gainers with a relatively large price hike in the past couple of weeks. While good news for shareholders, the company has traded much higher in the past year. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine Bath & Body Works’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Bath & Body Works

Is Bath & Body Works Still Cheap?

Good news, investors! Bath & Body Works is still a bargain right now according to our price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. we find that Bath & Body Works’s ratio of 8.82x is below its peer average of 16.83x, which indicates the stock is trading at a lower price compared to the Specialty Retail industry. However, given that Bath & Body Works’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Bath & Body Works look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a negative profit growth of -6.3% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Bath & Body Works. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Although BBWI is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to BBWI, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on BBWI for some time, but hesitant on making the leap, we recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

If you want to dive deeper into Bath & Body Works, you'd also look into what risks it is currently facing. When we did our research, we found 3 warning signs for Bath & Body Works (1 is significant!) that we believe deserve your full attention.

If you are no longer interested in Bath & Body Works, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.