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Is Williams-Sonoma (WSM) a Great Stock for Value Investors?
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Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Williams-Sonoma, Inc. (WSM - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Williams-Sonoma has a trailing twelve months PE ratio of 14.28, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 compares in at about 20.53. If we focus on the stock’s long-term PE trend, the current level puts Williams-Sonoma’s current PE ratio below its midpoint over the past five years.
We should also point out that Williams-Sonoma has a forward PE ratio (price relative to this year’s earnings) of just 13.47, so it is fair to say that a slightly more value-oriented path may be ahead for Williams-Sonoma stock in the near term too.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Williams-Sonoma has a P/S ratio of about 0.86. This is pretty lower than the S&P 500 average, which comes in at 3.11 right now. Also, as we can see in the chart below, this is below the highs for this stock in particular over the past few years.
If anything, WSM is in the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, Williams-Sonoma currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes Williams-Sonoma a solid choice for value investors.
What About the Stock Overall?
Though Williams-Sonoma might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘F’ and a Momentum score of ‘D’. This gives WSM a Zacks VGM score—or its overarching fundamental grade—of ‘C’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been witnessing unfavorable revisions recently. The current quarter has seen one estimate going higher in the past sixty days compared to three lower, while the full year estimate has seen no upward and four downward movements in the same time period.
As a result, the current quarter consensus estimate has inched down by 2% in the past two months, and the full year estimate has dropped by 1%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
This bearish trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.
Bottom Line
Williams-Sonoma is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (Bottom 23% out of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the Zacks Retail-Home Furnishing industry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
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Is Williams-Sonoma (WSM) a Great Stock for Value Investors?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Williams-Sonoma, Inc. (WSM - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Williams-Sonoma has a trailing twelve months PE ratio of 14.28, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 compares in at about 20.53. If we focus on the stock’s long-term PE trend, the current level puts Williams-Sonoma’s current PE ratio below its midpoint over the past five years.
We should also point out that Williams-Sonoma has a forward PE ratio (price relative to this year’s earnings) of just 13.47, so it is fair to say that a slightly more value-oriented path may be ahead for Williams-Sonoma stock in the near term too.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Williams-Sonoma has a P/S ratio of about 0.86. This is pretty lower than the S&P 500 average, which comes in at 3.11 right now. Also, as we can see in the chart below, this is below the highs for this stock in particular over the past few years.
If anything, WSM is in the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, Williams-Sonoma currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes Williams-Sonoma a solid choice for value investors.
What About the Stock Overall?
Though Williams-Sonoma might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘F’ and a Momentum score of ‘D’. This gives WSM a Zacks VGM score—or its overarching fundamental grade—of ‘C’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been witnessing unfavorable revisions recently. The current quarter has seen one estimate going higher in the past sixty days compared to three lower, while the full year estimate has seen no upward and four downward movements in the same time period.
As a result, the current quarter consensus estimate has inched down by 2% in the past two months, and the full year estimate has dropped by 1%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Williams-Sonoma, Inc. Price and Consensus
Williams-Sonoma, Inc. Price and Consensus | Williams-Sonoma, Inc. Quote
This bearish trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.
Bottom Line
Williams-Sonoma is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (Bottom 23% out of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the Zacks Retail-Home Furnishing industry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
5 Trades Could Profit "Big-League" from Trump Policies
If the stocks above spark your interest, wait until you look into companies primed to make substantial gains from Washington's changing course. Today Zacks reveals 5 tickers that could benefit from new trends like streamlined drug approvals, tariffs, lower taxes, higher interest rates, and spending surges in defense and infrastructure. See these buy recommendations now >>