Is It Too Late To Consider Buying Bath & Body Works, Inc. (NYSE:BBWI)?

Bath & Body Works, Inc. (NYSE:BBWI), is not the largest company out there, but it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$36.75 at one point, and dropping to the lows of US$26.71. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Bath & Body Works' current trading price of US$28.92 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Bath & Body Works’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Bath & Body Works

What Is Bath & Body Works Worth?

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 6.76x is below its peer average of 14.71x, which indicates the stock is trading at a lower price compared to the Specialty Retail industry. Although, there may be another chance to buy again in the future. This is because Bath & Body Works’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will Bath & Body Works generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 -9.4% 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. We recommend you think about 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.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Be aware that Bath & Body Works is showing 4 warning signs in our investment analysis and 2 of those are a bit concerning...

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.