Wayfair Inc (W, Financial) recently experienced a daily loss of 3.41%, yet it has seen a gain of 14.18% over the past three months. With a reported Loss Per Share of 8.29, investors are keen to understand if the stock is fairly valued. This article delves into Wayfair's valuation, providing a detailed analysis to determine whether the current market price reflects the company's intrinsic value.
Company Introduction
Wayfair engages in robust e-commerce across the United States, Canada, the United Kingdom, Germany, and Ireland, with the U.S. accounting for 86% of its 2022 sales. Founded in 2002 and publicly traded since 2014, Wayfair offers an expansive range of products, from furniture to home goods, through its various brands. With a current stock price of $64.82 and a market cap of $7.60 billion, we compare this against the GF Value of $68.17 to gauge the stock's fair market valuation.
Summarizing GF Value
The GF Value is an exclusive metric that estimates the intrinsic value of a stock based on historical trading multiples, a GuruFocus adjustment factor, and future business performance projections. The GF Value Line indicates the stock's fair trading value. If Wayfair's stock price hovers significantly above this line, it may be overvalued, suggesting lower future returns. Conversely, a price well below the line could indicate undervaluation and potentially higher future returns. Currently, Wayfair (W, Financial) is considered fairly valued, suggesting that its long-term return may align closely with the company's business growth rate.
Link: These companies may deliver higher future returns at reduced risk.
Financial Strength
Investors should examine a company's financial strength to avoid potential capital loss. Wayfair's cash-to-debt ratio of 0.32 is below the industry median, resulting in a financial strength rating of 4 out of 10 by GuruFocus. This indicates concerns regarding Wayfair's balance sheet stability.
Profitability and Growth
Wayfair's profitability has been inconsistent, with only 1 profitable year over the past decade. The company's operating margin of -7.45% is lower than most of its industry peers. Similarly, Wayfair's growth prospects are mixed, with a 3-year average revenue growth rate that is average for the industry, but an EBITDA growth rate that ranks poorly compared to its peers.
ROIC vs. WACC
Comparing Return on Invested Capital (ROIC) with the Weighted Average Cost of Capital (WACC) helps gauge profitability. Wayfair's ROIC of -37.44 is significantly lower than its WACC of 14.61, indicating that the company is not generating sufficient returns on its investments.
Conclusion
In conclusion, Wayfair Inc (W, Financial) appears to be fairly valued at its current market price. However, the company's financial health and profitability are concerning, and its growth ranks below many competitors in the Retail - Cyclical industry. For a deeper dive into Wayfair's financials, interested parties can explore the 30-Year Financials here.
To discover high-quality companies that may deliver above-average returns, consider using the GuruFocus High Quality Low Capex Screener.
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.
