Assessing Victoria's Secret (VSCO) Valuation After Strong Q3 Beat And Upgraded Full Year Outlook

What sparked the latest move in Victoria's Secret (VSCO)?

Victoria's Secret (VSCO) shares have been in focus after the retailer reported third quarter results that topped sales and earnings expectations and raised its full year outlook, citing ongoing business momentum.

See our latest analysis for Victoria's Secret.

The latest earnings beat and upgraded outlook come on top of a sharp improvement in recent trading, with a 90 day share price return of 75.54% and a 1 year total shareholder return of 130.22%. This suggests momentum has been building as investors reassess the business following stronger results and new institutional interest.

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With the shares up sharply and the stock trading slightly above the average analyst price target of US$62.67, the bigger question now is whether Victoria's Secret still trades at a discount to its fundamentals or if the market is already pricing in future growth.

Most Popular Narrative: 106.3% Overvalued

The most followed narrative puts Victoria's Secret's fair value at $31.20, well below the last close at $64.37, setting up a clear valuation gap for you to assess.

Upward revisions in price targets by several firms reflect heightened expectations for earnings growth and ongoing progress under the company’s transformation strategy.

Some maintain more neutral ratings, citing that while recent metrics are promising, Victoria's Secret must demonstrate consistent top-line growth and margin expansion to justify higher valuations.

Read the complete narrative.

Analysts are building this fair value on a tight mix of modest revenue growth, pressured margins and a richer earnings multiple a few years out. Want to see how those moving parts fit together and what kind of profit profile they are baking in by the late 2020s? The full narrative lays out the exact growth path and valuation swing that needs to line up for $31.20 to make sense.

Result: Fair Value of $31.20 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, tariff headwinds projected at US$100 million for fiscal 2025 and ongoing pressure on mall based stores could still upset that fair value narrative.

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

Another Way To Look At Value

That 106.3% “overvalued” narrative is built on one set of assumptions, but our DCF model offers a different perspective. On Simply Wall St’s numbers, Victoria's Secret trades at $64.37 versus an estimated future cash flow value of $103.17, which suggests it may be undervalued. Which set of assumptions do you find more realistic?

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 Victoria's Secret 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 53 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

After all this, are you leaning bullish or cautious on Victoria's Secret? Take a moment to move quickly, review the full picture yourself, and weigh 3 key rewards and 1 important warning sign before you decide how it fits in your portfolio.

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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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