Urban Outfitters Inc (URBN, Financial) recently experienced a notable daily loss of -12.37%, contributing to a 3-month decline of -6.66%. Despite these fluctuations, the company maintains an Earnings Per Share (EPS) of 2.4. Investors and analysts are keen to determine if this stock is fairly valued in the current market. This article delves into a comprehensive valuation analysis to address this question and provide investors with insights into Urban Outfitters' intrinsic value.
Company Introduction
Urban Outfitters Inc (URBN, Financial), founded in 1970 and headquartered in Philadelphia, is a multifaceted apparel and home goods retailer. Operating approximately 700 stores and e-commerce platforms primarily in North America, which accounts for 87% of its fiscal 2023 sales, Urban Outfitters has diversified its brand portfolio to include Urban Outfitters, Free People, FP Movement, and Anthropologie. While retail sales represent 92% of its revenue, the company also engages in wholesale operations, restaurant ownership, and a clothing rental and resale business named Nuuly. The company's stock price of $32.55 is juxtaposed against the GF Value of $34.39, setting the stage for an in-depth valuation analysis.
Summarize GF Value
The GF Value is a unique measure that estimates the intrinsic value of a stock based on historical trading multiples, a GuruFocus adjustment factor, and future business performance projections. Urban Outfitters (URBN, Financial) appears to be fairly valued according to this method. The current share price aligns closely with the GF Value Line, suggesting that the long-term return of its stock should parallel the company's business growth rate.
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Financial Strength
Investors must scrutinize a company's financial strength to avoid potential capital loss. Urban Outfitters' cash-to-debt ratio of 0.43 places it below the median for the Retail - Cyclical industry. This gives Urban Outfitters a financial strength rating of 6 out of 10, indicating a fair balance sheet.
Profitability and Growth
Consistent profitability is a desirable trait for potential investments, with Urban Outfitters achieving profitability for the past decade. The company boasts a revenue of $4.90 billion and an Earnings Per Share (EPS) of $2.4. With an operating margin of 6.03%, Urban Outfitters outperforms 62.88% of its industry peers. Its profitability rank is a robust 8 out of 10.
Regarding growth, Urban Outfitters' 3-year average annual revenue growth of 8.7% surpasses that of 65.3% of industry companies. However, its EBITDA growth rate of -0.6% falls short, ranking lower than 68.46% of its peers.
ROIC vs WACC
An analysis of Urban Outfitters' Return on Invested Capital (ROIC) relative to its Weighted Average Cost of Capital (WACC) suggests the company is just shy of creating shareholder value, with an ROIC of 8.06% against a WACC of 8.45%.
Conclusion
Overall, Urban Outfitters (URBN, Financial) presents as fairly valued. The company's financial health is sound, and its profitability is robust, although its growth could be stronger. To gain a deeper understanding of Urban Outfitters' financials, interested parties can review the company's 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
