An Excellent Buying Opportunity

03/13/2017 7:00 am EST


Roy Ward

Chief Analyst, Cabot Benjamin Graham Value Investor

Williams-Sonoma (WSM) markets a wide selection of merchandise through its retail stores and e-commerce websites under the brands Williams-Sonoma, Pottery Barn, Pottery Barn Kids, West Elm and Rejuvenation. 

Sales will increase 5% and EPS will climb 10% to $3.70 during the 12 months ending January 31, 2018. New store openings and continued growth in e-commerce will provide the spark. 

WSM is reasonably valued at 17.5 times current EPS. Furniture sales will continue to grow slowly, but effective marketing will continue to boost e-commerce results and market share gains. 

Lackluster sales and earnings in 2016 caused WSM to plummet 46% before stabilizing in the $50 range during the past six months. 

The price presents an excellent buying opportunity before sales and earnings begin to rebound during the next several quarters. I expect WSM to rise 44% to my Min Sell Price of 70.05 within two years. Buy at 50.30 or below.

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