Is It Time To Reassess Buckle (BKE) After A 46% One Year Share Price Gain

• If you are wondering whether Buckle's share price still offers value at current levels, this article will walk through what the numbers are and are not suggesting about the stock.
• Buckle last closed at US$53.87, with returns of 1.1% over 7 days, 9.6% over 30 days, 0.0% year to date, 46.4% over 1 year, 71.6% over 3 years and 140.2% over 5 years, which may have some investors reassessing both its upside and risk profile.
• Recent attention on Buckle has focused on how a specialty retailer is being priced relative to expectations for the broader retail sector and consumer spending trends. While day to day headlines can pull the share price around, they also give you hints about how the market is reassessing the company’s long term prospects and risks.
• Our Simply Wall St valuation model currently gives Buckle a value score of 4 out of 6, which suggests there are several areas where the shares screen as undervalued. Next, we will walk through the key valuation approaches and finish with a way to look beyond the usual ratios to understand the story behind that score.

Buckle delivered 46.4% returns over the last year. See how this stacks up to the rest of the Specialty Retail industry.

Approach 1: Buckle Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model looks at the cash Buckle is expected to generate in the future, then discounts those cash flows back to today to estimate what the business might be worth right now.

For Buckle, the model uses a 2 Stage Free Cash Flow to Equity approach. The starting point is last twelve month free cash flow of about $218.3 million. Simply Wall St then projects free cash flow out to 2035, using analyst inputs where available and extrapolating beyond that. For example, projected free cash flow in 2035 is $293.9 million, with each future year discounted back to today in dollar terms.

Adding those discounted cash flows together gives an estimated intrinsic value of US$84.49 per share. Compared with the recent share price of US$53.87, the model implies a 36.2% discount, which indicates Buckle is trading below this DCF estimate of value.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Buckle is undervalued by 36.2%. Track this in your watchlist or portfolio, or discover 53 more high quality undervalued stocks.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Buckle.

Approach 2: Buckle Price vs Earnings

For a profitable company like Buckle, the P/E ratio is a useful way to relate what you pay for the stock to the earnings it currently produces. Investors usually accept a higher or lower P/E depending on what they expect for future earnings and how risky they think those earnings might be, so growth expectations and perceived risk both shape what feels like a normal or fair P/E range.

Buckle is currently trading on a P/E of 13.12x. That sits below the Specialty Retail industry average P/E of 20.15x and also below the peer group average of 21.38x. On the surface, that points to a lower earnings multiple than many sector peers.

Simply Wall St also estimates a Fair Ratio for Buckle of 12.52x, which is the P/E level it might expect given factors such as the company’s earnings profile, industry, profit margins, market cap and risk characteristics. This Fair Ratio can be more informative than a simple comparison with peers or the industry because it adjusts for company specific features rather than treating all retailers as identical. With the actual P/E at 13.12x versus a Fair Ratio of 12.52x, Buckle screens as slightly more expensive than that modelled level.

Result: OVERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 21 top founder-led companies.

Upgrade Your Decision Making: Choose your Buckle Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives, which let you set out your own story for Buckle, link that story to a forecast for revenue, earnings and margins, and then connect it to a fair value that you can compare with the current price on Simply Wall St's Community page, where millions of investors share their views. One investor might build a Buckle Narrative around the analyst case that revenue grows by 4.0% a year with profit margins at 16.1% and earnings at US$226.1 million by 2028, which supports a fair value close to the US$54.00 analyst target. Another investor might focus more on the risks around mall exposure, e commerce mix, inventory and costs, and decide on a lower growth path and lower fair value. Both Narratives automatically update when fresh news or earnings data is added.

Do you think there's more to the story for Buckle? Head over to our Community to see what others are saying!

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com