Today we're going to take a closer look at large-cap Consumer Discretionary company Best Buy Co., whose shares are currently trading at $82.9. We've been asking ourselves whether the company is under or over valued at today's prices... let's perform a brief value analysis to find out!
A Very Low P/E Ratio but Trades Above Its Graham Number:
Best Buy Co., Inc. engages in the retail of technology products in the United States and Canada. The company belongs to the Consumer Discretionary sector, which has an average price to earnings (P/E) ratio of 22.33 and an average price to book (P/B) ratio of 3.12. In contrast, Best Buy Co. has a trailing 12 month P/E ratio of 14.0 and a P/B ratio of 6.49.
Best Buy Co.'s PEG ratio is 4.05, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
EPS Trend Sustained Primarily by Reducing the Number of Shares Outstanding:
| 2020-03-23 | 2021-03-19 | 2022-03-18 | 2023-03-17 | |
|---|---|---|---|---|
| Revenue (MM) | $43,638 | $47,262 | $51,761 | $46,298 |
| Gross Margins | 23.0% | 22.4% | 22.5% | 21.4% |
| Operating Margins | 4.7% | 5.6% | 5.8% | 4.2% |
| Net Margins | 3.53% | 3.8% | 4.74% | 3.06% |
| Net Income (MM) | $1,541 | $1,798 | $2,454 | $1,419 |
| Net Interest Expense (MM) | -$64 | -$52 | -$25 | -$35 |
| Depreciation & Amort. (MM) | -$812 | -$839 | -$869 | -$918 |
| Earnings Per Share | $5.75 | $7.0 | $9.85 | $5.91 |
| EPS Growth | n/a | 21.74% | 40.71% | -40.0% |
| Diluted Shares (MM) | 268 | 257 | 249 | 218 |
| Free Cash Flow (MM) | $3,308 | $5,640 | $3,989 | $2,754 |
| Capital Expenditures (MM) | -$743 | -$713 | -$737 | -$930 |
| Net Current Assets (MM) | -$3,255 | -$1,940 | -$3,945 | -$4,206 |
| Current Ratio | 1.1 | 1.19 | 0.99 | 0.98 |
| Long Term Debt (MM) | $1,257 | $1,253 | $1,216 | $1,160 |
| Net Debt / EBITDA | -0.49 | -1.95 | -0.62 | -0.35 |
Best Buy Co. has stable revenues and increasing reinvestment in the business and low leverage. Additionally, the company's financial statements display average operating margins with a stable trend and consistent free cash flow. However, the firm suffers from slimmer gross margins than its peers and EPS growth achieved by reducing the number of outstanding shares.
