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Williams-Sonoma, Inc. (WSM) Hit a 52 Week High, Can the Run Continue?

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Have you been paying attention to shares of Williams-Sonoma (WSM - Free Report) ? Shares have been on the move with the stock up 16.3% over the past month. The stock hit a new 52-week high of $182 in the previous session. Williams-Sonoma has gained 58.3% since the start of the year compared to the 19.6% move for the Zacks Retail-Wholesale sector and the 29.8% return for the Zacks Retail - Home Furnishings industry.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on November 16, 2023, Williams-Sonoma reported EPS of $3.66 versus consensus estimate of $3.34.

For the current fiscal year, Williams-Sonoma is expected to post earnings of $14.28 per share on $7.73 billion in revenues. This represents a -13.66% change in EPS on a -10.92% change in revenues. For the next fiscal year, the company is expected to earn $14.70 per share on $7.79 billion in revenues. This represents a year-over-year change of 2.93% and 0.79%, respectively.

Valuation Metrics

Williams-Sonoma may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.

Williams-Sonoma has a Value Score of B. The stock's Growth and Momentum Scores are C and B, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 12.7X current fiscal year EPS estimates, which is not in-line with the peer industry average of 13.3X. On a trailing cash flow basis, the stock currently trades at 9X versus its peer group's average of 7.2X. Additionally, the stock has a PEG ratio of 1.27. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Williams-Sonoma currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Williams-Sonoma passes the test. Thus, it seems as though Williams-Sonoma shares could still be poised for more gains ahead.

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