BATH & BODY WORKS INC (NYSE:BBWI) – A Potentially Undervalued Retail Stock

BATH & BODY WORKS INC (NYSE:BBWI) was identified by our stock screener as a decent value candidate. The company shows solid profitability and reasonable financial health while trading at an attractive valuation. Here’s why BBWI may be worth a closer look for value investors.

Valuation Highlights

BBWI stands out with a strong valuation rating of 8/10. Key points include:

• P/E Ratio of 8.35 – Significantly below both the industry average (51.44) and the S&P 500 (26.91).
• Forward P/E of 7.42 – Also well below the sector and broader market.
• Price/Free Cash Flow – Trades cheaper than 88.5% of its specialty retail peers.

These metrics suggest the stock is priced conservatively relative to its earnings potential.

Profitability Strengths

The company earns a profitability rating of 7/10, supported by:

• High Return on Invested Capital (ROIC) of 29.38% – Outperforming 95% of industry peers.
• Operating Margin of 17.53% – Above 94% of competitors.
• Consistent Earnings – Profitable over the past five years with stable cash flow.

Financial Health

BBWI’s financial health scores a neutral 5/10, with mixed but manageable conditions:

• Debt Reduction – The company has lowered its debt-to-assets ratio compared to last year.
• Altman-Z Score of 2.62 – Indicates moderate bankruptcy risk, better than 61% of peers.
• Liquidity Concerns – A quick ratio of 0.73 suggests some short-term obligations may be tight.

Growth Outlook

Growth is modest (4/10), but with positive signs:

• EPS Growth Expected at 9.63% Annually – An acceleration from recent trends.
• Revenue Growth Slowing – Projected at 3.09%, down from historical 6.22%.

Dividend Considerations

BBWI offers a 2.89% dividend yield, slightly above the S&P 500 average. However, payouts have declined by 7.77% annually over time.

Our Decent Value Stocks screener lists more stocks with similar value characteristics.
For a deeper dive, review the full fundamental report on BBWI.

Disclaimer

This is not investing advice! The article highlights observations at the time of writing, but you should always conduct your own analysis before making investment decisions.