How Burlington Stores Stock Stacks Up After 7% Drop and Rising Cash Flow Forecasts

If you’re eyeing Burlington Stores and wondering whether now is the time to buy, hold, or steer clear, you’re not alone. The company’s stock has served up plenty of talking points lately, especially if you’re keeping tabs on both short-term bumps and bigger-picture trends. Over the last three years, shares have more than doubled, soaring 126.2%. But if you focus on the past month or even this year, things start to look a bit shakier, with a 7.4% drop in the last 30 days and shares down 9.0% year-to-date. Even so, the recent stock moves seem less about bad news and more about shifting investor sentiment as the broader retail sector navigates inflation and changes in consumer spending habits.

For investors who care about what they’re actually paying for this growth or potential growth, Burlington Stores currently carries a valuation score of 2 out of 6, indicating it’s undervalued in only two out of the six checks we use. That’s not a screaming bargain compared to some deep-value plays, but it certainly isn’t overpriced compared to many headline-grabbing retailers, either.

So how does Burlington stack up when we dig into the details of its valuation? Let’s break down how it measures up on different popular valuation metrics. Stick around to the end, though, because there is a smarter way to cut through the numbers that you won’t want to miss.

Burlington Stores scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Burlington Stores Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's value by projecting its future cash flows and then discounting those amounts back to today's dollars. This approach provides a way to assess what Burlington Stores is actually worth based on its potential to generate cash in the years ahead, rather than market hype or short-term movements.

Currently, Burlington Stores reports a Free Cash Flow (FCF) of $6.07 million. Looking at analyst forecasts, total FCF is expected to jump significantly over the next five years, and projections indicate that by 2030, annual FCF could reach around $976 million. Beyond the analyst horizon, estimates continue to rise based on growth models provided by Simply Wall St.

According to this two-stage DCF model, the stock's estimated intrinsic value lands at $298.34 per share. This is about 12.9% higher than the current trading price. This suggests that based on the company's future cash generation potential, the shares appear undervalued.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Burlington Stores.

Our Discounted Cash Flow (DCF) analysis suggests Burlington Stores is undervalued by 12.9%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Burlington Stores Price vs Earnings (PE)

The Price-to-Earnings (PE) ratio is a popular way to value established, profitable companies like Burlington Stores, because it reflects how much investors are willing to pay for each dollar of earnings. A higher PE can signal higher growth expectations or, alternatively, a premium placed on stability and quality. On the other hand, a lower PE could mean the market is pricing in more risk or expects slower growth ahead.

Burlington Stores currently trades at a PE of 29.6x. When compared to the average PE of specialty retail peers at 18.2x and an industry average of 18.9x, Burlington clearly commands a significant premium. Investors are likely paying up for Burlington’s growth track record or long-term prospects.

However, comparing to industry averages only tells part of the story. Simply Wall St’s Fair Ratio takes a more holistic approach, blending in factors such as the company’s expected earnings growth, typical profit margins for the sector, its size, and risk profile. For Burlington, the Fair Ratio is set at 24.5x. This tailored measure is designed to show what a “normal” PE should look like for Burlington, rather than simply comparing it to a broad industry basket.

At present, Burlington’s actual PE is just over the Fair Ratio. The difference is not dramatic, suggesting the stock price is in line with what long-term fundamentals and risks would justify at this stage.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Burlington Stores Narrative

Earlier, we mentioned there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is simply your story—your unique perspective about Burlington Stores and its future—translated into numbers like expected revenue, profit margins, and fair value. Instead of relying solely on static ratios, Narratives let you connect what you believe about the company (for example, the strength of its store expansion or risks facing its business) directly to its future forecast and what you think the stock is actually worth.

Narratives are easy to use and available on Simply Wall St’s Community page, where millions of investors create and update their own. They help you decide when to buy or sell by comparing your calculated Fair Value to the current market price, and automatically update when new company news or earnings are released, so your view is always relevant.

For Burlington Stores, Narratives can vary widely: some investors believe aggressive expansion and off-price retail trends justify a Fair Value as high as $430.0 per share, while others take a more cautious approach, setting their value closer to $328.0. By building your own Narrative, you can see how your assumptions stack up against others and make more confident, well-informed investment decisions.

Do you think there's more to the story for Burlington Stores? Create your own Narrative to let the Community know!

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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