Shares of Stitch Fix (SFIX, Financial) plummeted 38.27% recently after a disappointing earnings report. This steep decline was primarily driven by the company's larger-than-expected losses and gloomy future outlook.
Analysts had predicted a loss of $0.19 per share on $318.5 million in quarterly sales. Stitch Fix reported $319.6 million in sales but posted a larger-than-expected loss of $0.30 per share. For Q4, sales declined 12.4% year over year, while losses increased by 25%. Losses from continuing operations were $0.29 per share, a 70% increase from the previous year. Despite these results, CEO Matt Baer mentioned that the company met the high end of its guidance for both top and bottom lines.
Looking ahead to fiscal Q1 2025, Stitch Fix expects sales between $303 million and $310 million, a 15% to 17% decline year over year. For fiscal 2025, sales are anticipated to decrease by 13% to 17%. Stitch Fix did not offer guidance on GAAP earnings, citing uncertain restructuring costs and other variables.
As of the latest data, Stitch Fix carries significant risk signals. The company's Altman Z-Score of 1.91 falls into the grey area, indicating potential financial stress. Moreover, revenue per share has been declining for the last five years, and insider selling over the past three months totaled 647,383 shares. On a positive note, the company has a high Piotroski F-Score of 7, suggesting a very healthy financial situation, and the Beneish M-Score of -4.79 indicates that the company is unlikely to be a manipulator.
Valuation metrics paint a mixed picture. Stitch Fix has a price-to-book ratio of 1.51 and a GF Value of $3.05, indicating it is modestly undervalued. According to GF Value, the stock is undervalued. The company's current market cap stands at $283.21 million, and its enterprise value is estimated at $345.57 million.
The company’s financial health remains questionable, with a net margin of -9.63% and an operating margin of -9.98%. Its cash-to-debt ratio is relatively strong at 2.1, but the equity-to-asset ratio is only 0.38. The high short interest at 24.48% and the volatility of 87.29% further highlight investor concerns.
Given these points, investors should exercise caution when considering Stitch Fix (SFIX, Financial) as an investment. The company is facing significant challenges, and its future guidance suggests continued difficulties. However, its current valuation metrics might attract value-focused investors willing to bet on a turnaround.
