Assessing Dillard's (DDS) Valuation After Mixed Recent Share Price Performance

Dillard's (DDS) has been drawing fresh attention from investors after a mixed stretch in its share performance, with gains over the past 3 months but a decline over the past month raising valuation questions.

See our latest analysis for Dillard's.

Recent trading paints a mixed picture, with a 5.49% 7 day share price return and a 7.45% 30 day share price decline. The 49.70% 1 year total shareholder return suggests longer term momentum has been strong and recent gains may be consolidating.

If Dillard's performance has your attention, it could be a good moment to broaden your search and check out fast growing stocks with high insider ownership.

With Dillard's trading around $646.20, carrying a low value score of 2 and sitting at a premium to the average analyst price target, it is fair to ask: is there real upside left here, or is the market already pricing in future growth?

Price-to-Earnings of 17.4x: Is it justified?

Dillard's current P/E of 17.4x, against a last close of $646.20, sits below both the US market and multiline retail peer averages, yet above its estimated fair P/E.

The P/E ratio compares the share price to earnings per share, so it gives you a quick sense of how much investors are paying for each dollar of profit. For a mature department store chain like Dillard's, P/E is a common yardstick because earnings are a key focus for investors watching traditional retail businesses.

On one hand, Dillard's P/E of 17.4x is below the US market at 19x and below the global multiline retail industry average of 19.4x, as well as under the peer group average of 21.3x. That suggests the market is not assigning a premium price tag relative to many peers, even though Dillard's has high quality earnings. On the other hand, the same analysis indicates that Dillard's looks expensive versus an estimated fair P/E of 13x, which is a level the valuation work suggests the market could move towards if sentiment or earnings expectations cool.

Compared with peers, the picture is mixed. Dillard's looks cheaper than the typical multiline retailer on a simple peer or industry comparison, yet richer than its own fair P/E benchmark. That tension between relative value and fair ratio is what stands out in the current pricing.

Explore the SWS fair ratio for Dillard's

Result: Price-to-Earnings of 17.4x (ABOUT RIGHT)

However, there are still a couple of pressure points to keep in mind, including annual net income growth declining by 2.7% and revenue growth running at only 0.9%.

Find out about the key risks to this Dillard's narrative.

Another View: What Our DCF Says

Our DCF model comes to a fair value of about $515.25 per share, which is below the recent price of $646.20. On this view, Dillard's looks overvalued, and the gap raises a simple question for you as an investor: which story do you trust more, the market or the cash flow math?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Dillard's for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 880 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Dillard's Narrative

If you look at these numbers and reach a different conclusion, or simply prefer to test your own assumptions, you can build a full narrative for Dillard's in just a few minutes, starting with Do it your way.

A great starting point for your Dillard's research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

Looking for more investment ideas?

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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