Bath & Body Works (BBWI): Assessing Valuation After Lower Earnings Guidance Versus Beauty Retail Peers

Bath & Body Works (BBWI) shares recently came under pressure as fresh analyst commentary pointed to the company’s underwhelming earnings guidance for the upcoming quarter, particularly when compared to other retailers in the beauty and cosmetics space.

See our latest analysis for Bath & Body Works.

After a shaky set of results compared to retail peers, Bath & Body Works shares have struggled this year. The 1-year total shareholder return is down 13.1%, while the share price is off more than 35% since January. This reflects fading market momentum as investors weigh the company’s softer earnings outlook.

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With shares now trading at a significant discount to analyst price targets, investors must consider whether Bath & Body Works is undervalued after recent setbacks or if the market has already accounted for weaker prospects moving forward.

Most Popular Narrative: 39.9% Undervalued

Basing fair value on future cash flows and market expansion strategies, the strongest narrative sees Bath & Body Works as overlooked with a price potential far above its current closing price of $24.48. Expectations hinge on the company's ability to navigate its debt and leverage new opportunities globally and in men's products.

The first thing is they need to get through their mountain of debt. Once they can get through this debt, then their earnings growth is going to start growing rapidly and become more productive. This will not help with their low revenue growth, but it will show a significant amount of more FCF and just make the company more sound, especially with how much revenue they are already bringing in.

Read the complete narrative.

Curious how one investor forecasts such a massive upside for this retailer? The narrative teases bold growth assumptions, ambitious profit forecasts, and an aggressive path to a much higher price. Explore the details to discover the transformative targets and what future financial moves could accelerate this turnaround story.

Result: Fair Value of $40.73 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, if Bath & Body Works fails to accelerate debt reduction or international expansion, the turnaround narrative could quickly lose momentum with investors.

Find out about the key risks to this Bath & Body Works narrative.

Build Your Own Bath & Body Works Narrative

If you have a different view or want a hands-on look at the numbers and outlook, you can build your own take on Bath & Body Works in just a few minutes. Do it your way

A great starting point for your Bath & Body Works research is our analysis highlighting 3 key rewards and 3 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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