Is There an Opportunity in Williams-Sonoma After Impressive 32.5% Share Price Gain?

Thinking about what to do next with Williams-Sonoma stock? You are certainly not alone. After all, few home goods retailers have kept investors guessing the way Williams-Sonoma has. Whether you are a longtime holder or just considering a position, recent price action and the company’s overall value proposition are clearly top of mind right now. The past year has been strong, with the stock up 32.5% over twelve months, and an impressive 369.6% gain over the last five years. Even in the shorter term, shares are moving upward, with a 1.6% pop in the last week and a 4.8% rise in the past month. Several of these gains have come following broader market optimism for retailers and housing-adjacent sectors as consumer spending patterns shift post-pandemic and supply chains finally ease.

Of course, looking solely at share price history only gives part of the picture. If you are weighing whether Williams-Sonoma is undervalued, it helps to dig deeper into the numbers. According to a standard six-point valuation check, the company scores a 2, meaning it comes out as undervalued in two out of six categories. That is a solid start, but it leaves plenty more to unpack. In the next section, we will break down these valuation approaches and see where Williams-Sonoma stands. Stick around, because there is an even sharper lens for making sense of valuation that we will use at the end of the article.

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

Approach 1: Williams-Sonoma Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model aims to estimate Williams-Sonoma’s intrinsic value by projecting future cash flows and discounting them back to today, reflecting their present value. This approach considers what the business could generate in free cash flow over time, then adjusts for risk and the time value of money.

Currently, Williams-Sonoma generates annual free cash flow of $1.05 billion. Using both analyst forecasts and Simply Wall St extrapolations, expectations are for this cash flow to steadily increase, reaching approximately $2.02 billion in 2035. The analysis uses a two-stage Free Cash Flow to Equity methodology. Analyst projections are used through 2028, with extended forecasts beyond that point. All projections are denominated in US dollars.

Based on these forward-looking estimates, the model calculates an intrinsic fair value of $232.54 per share. This is about 13.4% above the current trading price, which means the stock appears to be undervalued according to the DCF method.

Result: UNDERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests Williams-Sonoma is undervalued by 13.4%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Williams-Sonoma Price vs Earnings

The Price-to-Earnings (PE) ratio is a widely used method for valuing established, profitable companies like Williams-Sonoma. This multiple measures how much investors are willing to pay for each dollar of earnings, making it a useful reference point, especially when the company has a consistent track record of profitability.

What makes a “normal” or “fair” PE ratio can vary depending on growth expectations and risk factors. Higher anticipated earnings growth or lower risk often justify a higher PE, while slower growth or greater risks might call for a lower ratio.

At present, Williams-Sonoma trades at a PE ratio of 21.8x. This is above the specialty retail industry average of 17.7x, but lower than the average of its direct peers at 26.2x. These comparisons provide a starting point, but they do not reflect company-specific factors.

This is where Simply Wall St’s Fair Ratio comes in. The Fair Ratio (17.9x) estimates the PE ratio appropriate for Williams-Sonoma by accounting for its unique growth outlook, profit margins, risks, market cap, and its place in the specialty retail industry. Unlike blunt peer or industry averages, the Fair Ratio adapts to the company’s own circumstances and provides a more tailored benchmark.

With Williams-Sonoma’s current PE at 21.8x and its Fair Ratio at 17.9x, the stock appears to be trading above what its fundamentals support. This suggests it may be overvalued on this measure.

Result: OVERVALUED

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 Williams-Sonoma Narrative

Earlier, we noted there is an even more insightful way to approach valuation, so let’s introduce you to Narratives. A Narrative is a simple, accessible tool that lets you connect your story about a company, your outlook on its future, the factors you believe matter most, and how you expect the business to perform, with the numbers behind a financial forecast and an estimated fair value.

Narratives are available to millions of investors on Simply Wall St’s Community page, making it easier than ever to turn your perspective into real, actionable insights. By attaching your reasons and assumptions to forecasts for Williams-Sonoma’s future revenue, earnings, and profit margins, a Narrative helps you see at a glance how your view compares with others and whether the current price offers opportunity or risk.

What makes Narratives powerful is their dynamic nature. Whenever new information like earnings reports or major news emerges, Narratives are updated automatically, ensuring your story stays relevant and actionable. For example, one investor might anticipate that digital investments and supply chain upgrades will drive higher margins and set a fair value of $230, while another sees risks from weaker housing demand and expects only $138. The platform brings these distinct perspectives into focus, letting you decide which story best matches your own view and what action to take next.

Do you think there's more to the story for Williams-Sonoma? 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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