Urban Outfitters’ common shares will need to reach $76 to achieve average annual stock market performance of 9.0% over the next 6 years. Urban Outfitters’ stock price will need to reach $89 by 2030 to achieve upper quartile performance. What is the market’s view of Urban Outfitters’ future operating performance as reflected in the current price of $45?
Executive Summary
- Price Target Research identifies Urban Outfitters as having: average profitability, instability, below average expected growth, and low financial strength. A big positive influence on Urban Outfitters’ valuation is its superior Risk Profile.
- Low valuation, below market shareholder returns. Current valuation levels are below average relative to the Urban Outfitters Peer Group. Recent market returns have underperformed the Urban Outfitters Peer Group. Total shareholder returns expected to significantly beat the overall equity market. Based on current investor expectations, Urban Outfitters shares should reach a level of $98 by 2030 — an 13.8% per year total shareholder return. A 2030 stock price of $76 would reflect median performance and a price of $89 would be required to reach upper quartile performance.
- Urban Outfitters’ past growth is modestly above average. Historical growth has been high relative to the Urban Outfitters Peer Group and forecasted growth is relatively below average. EPS Growth has been superior. This factor has buoyed market perceptions of Urban Outfitters. Urban Outfitters’ historical income statement growth has been higher than growth in the balance sheet. Revenue growth has exceeded asset growth; earnings growth has exceeded equity growth resulting in an improving return on equity. Urban Outfitters’ consensus growth expectations are lower than historical growth.
- Profitability is slightly above average. The company has very low cash and will have to work to generate attractive investments and improve valuation.
- Risk Profile has been Urban Outfitters’ biggest valuation strength. Urban Outfitters’ risk profile is favorable. Overall variability has been relatively low with relatively low revenue variability, relatively low E.P.S. variability, and above average stock price volatility. Financial Strength is below average and earnings’ expectations are below average. The debt/capital ratio has declined very significantly.
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