Shares of Victoria’s Secret (VSCO, Financial) fell 1.88% following the release of its second-quarter earnings report. The company’s earnings forecast for the next quarter missed analysts' expectations, and its gross margin did not meet Wall Street estimates. However, VSCO slightly exceeded analysts' revenue guidance expectations for the quarter.
Victoria's Secret (VSCO, Financial) is currently trading at $23.51, with a market capitalization of $1.84 billion. The company has a P/E ratio of 13.67 and a P/B ratio of 4.34. Despite recent setbacks, the stock has a 52-week high of $30.80 and a 52-week low of $13.62, indicating potential for volatility.
On the valuation front, Victoria's Secret is considered "Significantly Undervalued" according to the GF Value metric. The GF Value estimates the stock to be worth approximately $34.66, suggesting an upside potential from its current price.
However, the company faces several challenges. Victoria's Secret has recorded a loss in operating income at least once over the past three years, and its revenue per share has been in decline for the last five years. Additionally, the company has a Z-score of 1.92, placing it in the grey area for financial stress.
Victoria's Secret's financial strength is further questioned by its high long-term debt, which has been growing over the past three years. The Altman Z-score indicates some level of financial distress, and the company's return on invested capital (ROIC) is less than its weighted average cost of capital (WACC), suggesting inefficiency in capital use.
On a positive note, the company's Beneish M-Score of -2.62 implies that it is unlikely to be a manipulator. Additionally, Victoria's Secret has a strong institutional ownership of 98.47%, demonstrating confidence from major investors.
While Victoria's Secret (VSCO, Financial) has significant valuation upside according to GF Value, potential investors should be cautious given the financial challenges and volatility in its stock price. The upcoming earnings report estimated for November 2024 could provide more clarity on the company's performance and future prospects.
