Simple Concepts Research Group

Is Urban Outfitters (NASDAQ: URBN) A Good Buy At This Price?

by | Mar 8, 2022 | 52 Week Lows, Stock Picks

urban outfitters urbn stock valuation

Urban Outfitters (URBN) Company Overview & Stock Price Forecast

This article provides a brief analysis and stock rating for Urban Outfitters (URBN) including an updated stock price target. Additional data on the company’s earnings yield, price/earnings ratio, return on invested capital and YTD performance are discussed as well.

Urban Outfitters Fundamentals

URBN Stock Rating

Stock Price Target: $38.89

In the section below, we discuss the earnings yield, P/E, return on invested capital and YTD performance for Urban Outfitters in comparison to the Retail industry and the S&P 500.

Urban Outfitters is a Small Cap company with a Market Cap of $2.65B.

How are investors using Urban Outfitters earnings yield to assess the company?

Urban Outfitters (URBN)_ Earnings Yield in Comparison to the Retail Industry, S&P 500 and 10 Year Treasury Rate

The earnings yield is used to show the percentage of a company’s earnings per share. Investors typically use earnings yield to determine which assets are underpriced or overpriced relative to other variables, like sector, industry or bond yields. Simply put, the earnings yield of a company can be used to assess how expensive a company is in relation to the earnings that are generated. When valuing companies, the SIS Research Group does not utilize the inverse P/E ratio to calculate the earnings yield. Instead, we use an adjusted earning yield calculation to capture variation amongst companies (i.e. debt and tax rates).

The current earnings yield for Urban Outfitters is 29.41%, in comparison to 4.05% for the S&P 500 and 1.74% for the 10-year treasury bond. The median earnings yield for the Retail industry is 11.81%.

What does Urban Outfitters Price-to-Earnings Ratio (P/E) tell investors about the company?

Urban Outfitters (URBN)_ Price-to-Earnings, Price-to-Sales and Price-to-Book Value in Comparison to the Retail Industry and the S&P 500

The price-to-earnings ratio (P/E) is a relatively popular metric used by investors and analysts for valuing a company’s stock. The P/E ratio can be used to show how a stock’s valuation compares to other companies and the total market. Investors use the P/E ratio to determine what the market is willing to pay today based on a company’s past or future earnings. A high P/E ratio could mean that a stock’s price is too high relative to earnings, which could be a signal that a stock is currently overvalued. In turn, a low P/E ratio could indicate that a company’s current stock price is low relative to earnings. 

Urban Outfitters is currently trading at a P/E of 8.11. The P/E for the Retail industry is 19.34 and the P/E for the S&P 500 is 24.68.

What is the current Price-to-Sales Ratio (P/S) for Urban Outfitters?

The Price-to-Sales Ratio (P/S) looks at a company’s market cap and revenue to determine valuation. The P/S ratio is calculated by taking a company’s market cap and dividing by the total sales or revenue. The P/S ratio gives an idea of how much the market values every dollar of a company’s sales and can be effective in valuing unprofitable growth stocks or companies that are currently undergoing special situations or challenges. A lower the P/S ratio can be an indicator of good value.

Urban Outfitters is currently trading at a P/S of 0.55. The P/S for the Retail industry is 0.88 and the P/S for the S&P 500 is 2.86.

How does Urban Outfitters Price-to-BookRatio (P/B) compare to the Retail industry?

Price-to-book value (P/B) is the ratio of the market value of a company’s shares divided by its book value of equity (the value of it’s assets on the books). The book value is the difference between the book value of assets and liabilities. Typically, investors use the P/B ratio to assess if a stock is valued properly (a value of one means that the stock price is trading in line with the book value of the company). A company with a high P/B ratio could mean the stock price is overvalued as well as the converse.

Urban Outfitters P/B ratio is 1.39. The P/B for the Retail industry is 5.45 and the P/B for the S&P 500 is 4.40.

How attractive is Urban Outfitters Return on Invested Capital (ROIC) to investors?

Urban Outfitters (URBN)_ Return on Invested Capital in Comparison to the Retail Industry and the S&P 500

Investors use the return on invested capital (ROIC) to assess how efficient a company is at turning capital into profits. The ROIC is the amount of money a company makes on it’s investments that is above the average cost of debt and equity.

Investors can use the ROIC to provide context for metrics like the (P/E) ratio. For instance, when used in isolation a low P/E ratio could suggest a company is oversold but the decline could be because a company is no longer generating value for shareholders. Conversely, companies that consistently generate high rates of ROIC can plausibly trade at a premium compared to other stocks, even if their P/E ratios are high.

Urban Outfitters ROIC is currently 11.84% in comparison to 27.20% for the Retail industry and 9.10% for the S&P 500.

Urban Outfitters (URBN)_ Price Target & 52-Week Price Range

How has URBN stock performed over the past year? What is the current analyst price target?

Over the past 52 weeks, Urban Outfitters has traded between the range of $24.61 and $42.10.

The current Analyst Price Target for Urban Outfitters is $38.89.

What is Urban Outfitters YOY Performance in comparison to its industry and the total market?

The YOY performance for Urban Outfitters is -38.45%. The Retail industry has a YOY performance of 20.31% in comparison to the YOY S&P 500 performance of 11.85%.

Urban Outfitters (URBN)_ YOY Performance in Comparison to the Retail Industry and the S&P 500

Recent Financial Results (Q4, 2021)

  • Net income of $41M and earnings per diluted share of $0.41 for the three months ended January 2022
  • For the year ending in January 2022, net income was $311M and earnings per diluted share were a record $3.13
  • Total Company net sales for the three months ended January 2022, were a record $1.33; an increase of 13.9% compared to the three months ended January 31, 2020
  • Repurchased and subsequently retired 0.5 million common shares for approximately $7M. As of January 2022, 23.9M common shares remaining under the repurchase programs
  • Company opened a total of 56 new retail locations

Stock Price Target: $38.89

Company Overview

URBN Stock Rating

Urban Outfitters, Inc. engages in the retail and wholesale of general consumer products. The company operates through three segments: Retail, wholesale, and Subscription.

As of January 2021, it operated 247 Urban Outfitters, 237 Anthropologie Group, and 149 Free People stores in the United States, Canada, and Europe; and 11 restaurants. The company is also involved in the wholesale of young women’s contemporary casual apparel, intimates, activewear, and shoes under the Free People brand; and home goods through department and specialty stores worldwide. The company was founded in 1970 and is based in Philadelphia, Pennsylvania. The current CEO is Richard Hayne.

Be sure to add Urban Outfitters (URBN) to your Watch List and if you haven’t done so already, check in on the performance of our Current Portfolio. Keep it simple and always do your due diligence.

This material is provided for informational purposes only and is not financial advice. The information contained herein should not solely be used for the formation of an investment decision, whether you are a long term or short term investor.