Taking Stock of Bath & Body Works’s Valuation Following New Disney Villains Collection Launch

If you are weighing your next move with Bath & Body Works (BBWI), the latest headline might have caught your attention. The company just launched its much-anticipated Disney Villains fragrance line, this time with products inspired by Maleficent and the Evil Queen. The collection rolls out to loyalty members in late August and hits stores globally in early September. This marks not just a new product, but also a broader and deeper collaboration with Disney that is aimed at capturing imaginations and wallets worldwide. This launch is an interesting pivot for Bath & Body Works, especially in a year where stock momentum has wavered. The share price is down about 18% year-to-date and has fallen 9% over the past year, despite steady revenue and net income growth of nearly 3%. Short-term movement shows only modest gains in the last month and past 3 months, suggesting that investors are waiting for a more convincing catalyst or narrative shift. Still, the brand’s ability to strike cultural chords, especially through partnerships like this, keeps the potential for renewed interest alive. With shares lagging and the Disney tie-up driving headlines, some may be wondering whether Bath & Body Works is a bargain hiding in plain sight or if the market has already factored future growth into the price.

Most Popular Narrative: 23.7% Undervalued

According to the narrative by Zwfis, the current valuation pegs Bath & Body Works as notably undervalued compared to its fair value estimate, with a substantial discount rate factored in.

If they can hit these new target markets that I definitely believe they can hit these numbers. As of this moment I am willing to pay up to $33.95 assuming that they can hit my current 1 year projection and a 20% ROR.

Want the inside story behind this bold valuation? The narrative is driven by aggressive profit growth projections, ambitious market expansion strategies, and crucial margin assumptions. Curious what happens when the math goes beyond dividends and bets on debt paydown and untapped markets? Find out which overlooked financial signals point to a much higher target. According to this narrative, the market is missing something significant.

Result: Fair Value of $40.73 (UNDERVALUED)

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

However, ongoing debt levels and slower than expected international or male market expansion could challenge this optimistic outlook and delay meaningful gains.

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

Another View: Discounted Cash Flow Perspective

Looking at Bath & Body Works from the perspective of our DCF model presents a story similar to the user narrative. The DCF approach also indicates that the stock is undervalued, though it relies on its own set of assumptions regarding future cash flows. Is the market overlooking insights that the numbers suggest, or is there additional risk incorporated that is not immediately apparent?

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 Bath & Body Works 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 Bath & Body Works Narrative

If you see the numbers differently or want to test your own thesis, you can dive into the details and build a custom narrative in just minutes. Alternatively, you can do it your way.

A great starting point for your Bath & Body Works research is our analysis highlighting 2 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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