Is now the Perfect Time to Buy BBBY Stock? Management Changes, Share Repurchases, and Great Valuation

Today we are looking at Bed Bath & Beyond Inc. (NASDAQ: BBBY), to determine if the BBBY stock is a good buy. We will look at BBBY financial ratios, analyst ratings, and valuation to determine a BBBY stock forecast for 2025. What does BBBY Do? Bed Bath & Beyond Inc., together with its subsidiaries, operates a chain of retail stores. It sells a range of domestic merchandise, including bed linens and related items, bath items, and kitchen textiles; and home furnishings, such as kitchen and tabletop items, fine tabletop, basic housewares, general home furnishings, consumables, and various juvenile products. As of February 26, 2022, the company had 953 stores, which included 771 Bed Bath & Beyond stores in 50 states. Laying out Information for a BBBY Stock Forecast Who are Bed Bath & Beyond Inc.'s Competitors? In order to undergo a comparable analysis (to determine BBBY stocks value), we need to first outline who BBBY's competitors are. These competitors need to be publicly listed, have valid financial metrics/multiples, operate in a similar manner to BBBY, and have a market cap similar to BBBY (if possible). By keeping this in mind, I found the following list of companies to be some of BBBY stocks closest competitors: KIRK, RH, ETD, and W BBBY CEO Mark Tritton Ousted After Poor Q1 2022 Results Bed Bath & Beyond is replacing CEO Mark Tritton in a leadership shakeup after another quarter of financial struggle. Sue Gove is set to step in as interim CEO and is expected to revive Bed Bath’s brand, grow online sales and win back customers. As a result of this news, shares were down about 20% in early afternoon trading. Gove said the company needs to improve its performance and that its first quarter results are “not up to our expectations.” In addition to working to fix supply chain problems, reduce costs and improve its balance sheet, Gove said BBBY will go "back to the basics". Furthermore, Bed Bath & Beyond said it expects same-store sales to recover in the second half of the fiscal year but did not provide any forecast. Bed Bath & Beyond Inc.'s Earnings are Terrible as you Might Imagine BBBY Earnings (Yearly): BBBY Revenues: In FY 2022, BBBY experienced a yearly decrease in revenues of $-1.37B (or -14.79%) resulting in a total revenue figure of $7.87B. BBBY Cost of Revenues: In FY 2022, BBBY experienced a yearly decrease in their cost of revenues of $-730.66M (-11.95%), resulting in a total revenue figure of $5.38B. Since the decrease (of -11.95%), in BBBY's cost of revenue was greater (by 2.84%) than the decrease (of -14.79%) in BBBY's revenues, we should expect that BBBY experienced an decrease in their FY gross profits. BBBY Gross Profit: In FY 2022, BBBY experienced a yearly decrease in their gross profit of $-634.59M (or -20.35%) resulting in a total gross profit of $2.48B. This decrease is consistent with our conclusion from the comparison of revenues and cost of revenues between FY 2020 and FY 2021. BBBY EBITDA: In FY 2022, BBBY experienced a yearly decrease in their EBITDA of $-195.39M (or -241.04%) resulting in a total EBITDA of $-114.33M. This decrease (of -241.04%) stems from the fact that BBBY experienced a decrease in their gross profits of -20.35% (as we saw in the previous bullet point). BBBY Net Income: In FY 2022, BBBY experienced a yearly decrease in their net income of $-408.85M (or 271.17%) resulting in a total net income of $-559.62M. BBBY EPS: As a result of BBBY's decrease in net income of $-408.85M, BBBY's EPS also decreased (by $-3.37) from $-1.24 in FY 2021 to $-4.61 in FY 2022 Overall, in 2021 BBBY had a very poor financial performance, which is a main reason why they have decided to change up their leadership and go "back to the basics". Every important financial metric in this report experienced a sizeable decrease, which is horrible and gives investors little hope for their future and future financial performances. BBBY Earnings (Quarterly): BBBY Revenues: In Q4 2022, BBBY experienced a quarterly increase in revenues of $173.52M (or 9.24%) resulting in a total revenue figure of $2.05B. Seems to be off to a decent start... but we know this can't end well due to the fact that BBBY ousted Mark Tritton as a result of these earnings, so let's continue. BBBY Cost of Revenues: In Q4 2022, BBBY experienced a quarterly increase in their cost of revenues of $262.63M (21.72%), resulting in a total revenue figure of $1.47B. Since the increase (of 21.72%), in BBBY's cost of revenue was greater (by 12.48%) than the increase (of 9.24%) in BBBY's revenues, we should expect that BBBY experienced an decrease (roughly -12.48%) in their Q4 gross profits. BBBY Gross Profit: In Q4 2022, BBBY experienced a quarterly decrease in their gross profit of $-89.11M (or -13.32%) resulting in a total gross profit of $579.81M. This decrease is consistent with our conclusion from the comparison of revenues and cost of revenues between Q4 and Q3. BBBY EBITDA: In Q4 2022, BBBY experienced a quarterly decrease in their EBITDA of $-76.84M (or 787.36%) resulting in a total EBITDA of $-86.6M. This increase (of 787.36%) stems from the fact that BBBY experienced a decrease in their gross profits of -13.32% (as we saw in the previous bullet point). There it is... the point where this whole quarterly earnings is starting to look horrible. BBBY Net Income: In Q4 2022, BBBY experienced a quarterly increase in their net income of $117.32M (or -42.44%) resulting in a total net income of $-159.1M. BBBY EPS: As a result of BBBY's increase in net income of $117.32M, BBBY's EPS also increased (by $0.99) from $-2.78 in Q3 2022 to $-1.79 in Q4 2022. Wow... might have spoke too soon, this doesn't seem to be too bad. Let's see what their EPS result was compared to the estimate before jumping to any conclusions. Overall, it seems as though BBBY had a great financial performance as many of their financial metrics grew, most notably their EPS (by $0.99), as well as their net income (by $117.32M), and other metrics (as you can tell from the above bullet points). However, BBBY stock missed their EPS estimate by $-0.95 (or -3,167%), as they reported an EPS of $-0.92 for the quarter (compared to their estimated EPS of $0.03). There it is!!!! This is the reason why they ousted Tritton. Wow! Either the analysts forecasting BBBY's earnings were on something (if anyone knows what this might be let me know ;)), or BBBY's financial performance was horrendous. BBBY Quarterly Share Repurchase and No Forecasted Dilution Creates the Perfect Storm As part of their Q4 2022 earnings release, BBBY stated that they currently have 88.68M Shares Outstanding (weighted average), which is down -10.91M shares (from 99.59M shares outstanding in Q3 2022). This is great news as the shares that investors have been holding now represent a greater percentage of the BBBY company. Each share grew in value by roughly 12.3%, which as you can probably tell is very good. Furthermore, BBBY stock has up to 0 of shares that they can issue (thereby diluting BBBY's stock). This maximum dilution for the period would only have a dilutionary effect on BBBY of 0%, which once again is great news for investors. Majority of Analysts Remain Bearish or Neutral on BBBY Here is the current spread of BBBY stock ratings. In total there are 35 BBBY stock ratings, which fall in the following categories. 9 Buys 10 Holds 16 Sells Analyst Ratings have provided relatively strong indicators of future price movement, which is why they are used to determine if BBBY stock is a buy or sell. However, we know analysts aren't always right (*cough* *cough* predicting $0.03 EPS *cough*). Despite this, the vast majority of analysts are either bearish or neutral on the BBBY stock. This is generally not a great sign, however, if they are wrong the upside will likely be much greater (which is more incentive to be cautiously bullish). BBBY Stock Forecast 2025 Looks Great Using a Comparable Analysis to Determine a BBBY Stock Forecast 2025 Price to Book (P/B): BBBY's current P/B ratio is 3.01, compared to the average P/B ratio of BBBY's peers being 2.45. This implies that BBBY is overvalued and their share price should change by a factor of -18.60% to be at fair value (based on BBBY's P/B compared to the P/B of their peers). Enterprise Value to Sales (EV/S): BBBY stock EV/S ratio is currently 0.17, compared to the average EV/S ratio of BBBY's peers being 0.63. This implies that BBBY is undervalued, and their share price should change by a factor of 270.59% to be at fair value (based on BBBY's EV/S compared to the EV/S of their peers). Overall, BBBY stock is overvalued and needs to experience a change in stock price of (an average of) 126% to be considered “at fair value”. Is BBBY a good stock to buy right now? Let's take a minute to recap everything in this analysis. Firstly, BBBY ousted their CEO over poor financial results for 2021 and in their most recent quarterly earnings release (Q1 2022) we know this to be true becasue we analyzed their financial reports) all of this is rather bad news and makes it look like BBBY is a sell. Next, we know that BBBY has no potential dilution as it stands and have experinced a quarter of buybacks returning over 12% in value back to their shareolders, this is very good news. Furthermore, we know that Tritton was ousted as CEO and now we have Interim CEO Sue Gove, who has been tasked almost solely with recovering their financials and growing their business, this is good news as it shows BBBY's commitment to posting good financials for their business and their shareholders. Next, we know that the vast majority of analysts are either "beaish" or "neutral" on the BBBY stock, I wouldn't necessarily say that this is "bad" but it is certainly not good. Lastly, we know that BBBY could be undervalued due to my (very quick) comparables analysis, however this is not "good" as there were many metrics that I couldn't use (ie. P/E) becasue a decent amount of BBBY's financial ratios were negative. Overall, I am leaning more to the "buy" side on this one as I belive the recent dip has brought a good opportunity for growth, especially as we near their next earnings (not that I am expecting them to be great because it will take much longer than a quarter to fix BBBY's financial situation). However, if we see incremental steps in the right directionn it should help get investors and customers excited about BBBY again.

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Is now the Perfect Time to Buy BBBY Stock? Management Changes, Share Repurchases, and Great Valuation

Jun 29, 2022

bullish

general Analysis

[7 min Read]

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Photo by: Oxana Melis

Today we are looking at Bed Bath & Beyond Inc. (NASDAQ: BBBY), to determine if the BBBY stock is a good buy. We will look at BBBY financial ratios, analyst ratings, and valuation to determine a BBBY stock forecast for 2025.

What does BBBY Do?

Bed Bath & Beyond Inc., together with its subsidiaries, operates a chain of retail stores. It sells a range of domestic merchandise, including bed linens and related items, bath items, and kitchen textiles; and home furnishings, such as kitchen and tabletop items, fine tabletop, basic housewares, general home furnishings, consumables, and various juvenile products. As of February 26, 2022, the company had 953 stores, which included 771 Bed Bath & Beyond stores in 50 states.

Laying out Information for a BBBY Stock Forecast

Who are Bed Bath & Beyond Inc.'s Competitors?

In order to undergo a comparable analysis (to determine BBBY stocks value), we need to first outline who BBBY's competitors are.

These competitors need to be publicly listed, have valid financial metrics/multiples, operate in a similar manner to BBBY, and have a market cap similar to BBBY (if possible).

By keeping this in mind, I found the following list of companies to be some of BBBY stocks closest competitors:

KIRK, RH, ETD, and W

BBBY CEO Mark Tritton Ousted After Poor Q1 2022 Results

Bed Bath & Beyond is replacing CEO Mark Tritton in a leadership shakeup after another quarter of financial struggle. Sue Gove is set to step in as interim CEO and is expected to revive Bed Bath's brand, grow online sales and win back customers. As a result of this news, shares were down about 20% in early afternoon trading.

Gove said the company needs to improve its performance and that its first quarter results are “not up to our expectations.” In addition to working to fix supply chain problems, reduce costs and improve its balance sheet, Gove said BBBY will go "back to the basics". Furthermore, Bed Bath & Beyond said it expects same-store sales to recover in the second half of the fiscal year but did not provide any forecast.

Bed Bath & Beyond Inc.'s Earnings are Terrible as you Might Imagine

BBBY Earnings (Yearly):

  • BBBY Revenues: In FY 2022, BBBY experienced a yearly decrease in revenues of $-1.37B (or -14.79%) resulting in a total revenue figure of $7.87B.
  • BBBY Cost of Revenues: In FY 2022, BBBY experienced a yearly decrease in their cost of revenues of $-730.66M (-11.95%), resulting in a total revenue figure of $5.38B. Since the decrease (of -11.95%), in BBBY's cost of revenue was greater (by 2.84%) than the decrease (of -14.79%) in BBBY's revenues, we should expect that BBBY experienced an decrease in their FY gross profits.
  • BBBY Gross Profit: In FY 2022, BBBY experienced a yearly decrease in their gross profit of $-634.59M (or -20.35%) resulting in a total gross profit of $2.48B. This decrease is consistent with our conclusion from the comparison of revenues and cost of revenues between FY 2020 and FY 2021.
  • BBBY EBITDA: In FY 2022, BBBY experienced a yearly decrease in their EBITDA of $-195.39M (or -241.04%) resulting in a total EBITDA of $-114.33M. This decrease (of -241.04%) stems from the fact that BBBY experienced a decrease in their gross profits of -20.35% (as we saw in the previous bullet point).
  • BBBY Net Income: In FY 2022, BBBY experienced a yearly decrease in their net income of $-408.85M (or 271.17%) resulting in a total net income of $-559.62M.
  • BBBY EPS: As a result of BBBY's decrease in net income of $-408.85M, BBBY's EPS also decreased (by $-3.37) from $-1.24 in FY 2021 to $-4.61 in FY 2022

Overall, in 2021 BBBY had a very poor financial performance, which is a main reason why they have decided to change up their leadership and go "back to the basics". Every important financial metric in this report experienced a sizeable decrease, which is horrible and gives investors little hope for their future and future financial performances.

BBBY Earnings (Quarterly):

  • BBBY Revenues: In Q4 2022, BBBY experienced a quarterly increase in revenues of $173.52M (or 9.24%) resulting in a total revenue figure of $2.05B. Seems to be off to a decent start... but we know this can't end well due to the fact that BBBY ousted Mark Tritton as a result of these earnings, so let's continue.
  • BBBY Cost of Revenues: In Q4 2022, BBBY experienced a quarterly increase in their cost of revenues of $262.63M (21.72%), resulting in a total revenue figure of $1.47B. Since the increase (of 21.72%), in BBBY's cost of revenue was greater (by 12.48%) than the increase (of 9.24%) in BBBY's revenues, we should expect that BBBY experienced an decrease (roughly -12.48%) in their Q4 gross profits.
  • BBBY Gross Profit: In Q4 2022, BBBY experienced a quarterly decrease in their gross profit of $-89.11M (or -13.32%) resulting in a total gross profit of $579.81M. This decrease is consistent with our conclusion from the comparison of revenues and cost of revenues between Q4 and Q3.
  • BBBY EBITDA: In Q4 2022, BBBY experienced a quarterly decrease in their EBITDA of $-76.84M (or 787.36%) resulting in a total EBITDA of $-86.6M. This increase (of 787.36%) stems from the fact that BBBY experienced a decrease in their gross profits of -13.32% (as we saw in the previous bullet point). There it is... the point where this whole quarterly earnings is starting to look horrible.
  • BBBY Net Income: In Q4 2022, BBBY experienced a quarterly increase in their net income of $117.32M (or -42.44%) resulting in a total net income of $-159.1M.
  • BBBY EPS: As a result of BBBY's increase in net income of $117.32M, BBBY's EPS also increased (by $0.99) from $-2.78 in Q3 2022 to $-1.79 in Q4 2022. Wow... might have spoke too soon, this doesn't seem to be too bad. Let's see what their EPS result was compared to the estimate before jumping to any conclusions.

Overall, it seems as though BBBY had a great financial performance as many of their financial metrics grew, most notably their EPS (by $0.99), as well as their net income (by $117.32M), and other metrics (as you can tell from the above bullet points).

However, BBBY stock missed their EPS estimate by $-0.95 (or -3,167%), as they reported an EPS of $-0.92 for the quarter (compared to their estimated EPS of $0.03). There it is!!!! This is the reason why they ousted Tritton. Wow! Either the analysts forecasting BBBY's earnings were on something (if anyone knows what this might be let me know ;)), or BBBY's financial performance was horrendous.

BBBY Quarterly Share Repurchase and No Forecasted Dilution Creates the Perfect Storm

As part of their Q4 2022 earnings release, BBBY stated that they currently have 88.68M Shares Outstanding (weighted average), which is down -10.91M shares (from 99.59M shares outstanding in Q3 2022). This is great news as the shares that investors have been holding now represent a greater percentage of the BBBY company. Each share grew in value by roughly 12.3%, which as you can probably tell is very good. Furthermore, BBBY stock has up to 0 of shares that they can issue (thereby diluting BBBY's stock). This maximum dilution for the period would only have a dilutionary effect on BBBY of 0%, which once again is great news for investors.

Majority of Analysts Remain Bearish or Neutral on BBBY

Here is the current spread of BBBY stock ratings. In total there are 35 BBBY stock ratings, which fall in the following categories.

  • 9 Buys
  • 10 Holds
  • 16 Sells

Analyst Ratings have provided relatively strong indicators of future price movement, which is why they are used to determine if BBBY stock is a buy or sell. However, we know analysts aren't always right (*cough* *cough* predicting $0.03 EPS *cough*). Despite this, the vast majority of analysts are either bearish or neutral on the BBBY stock. This is generally not a great sign, however, if they are wrong the upside will likely be much greater (which is more incentive to be cautiously bullish).

BBBY Stock Forecast 2025 Looks Great

Using a Comparable Analysis to Determine a BBBY Stock Forecast 2025

  1. Price to Book (P/B): BBBY's current P/B ratio is 3.01, compared to the average P/B ratio of BBBY's peers being 2.45. This implies that BBBY is overvalued and their share price should change by a factor of -18.60% to be at fair value (based on BBBY's P/B compared to the P/B of their peers).
  2. Enterprise Value to Sales (EV/S): BBBY stock EV/S ratio is currently 0.17, compared to the average EV/S ratio of BBBY's peers being 0.63. This implies that BBBY is undervalued, and their share price should change by a factor of 270.59% to be at fair value (based on BBBY's EV/S compared to the EV/S of their peers).

Overall, BBBY stock is overvalued and needs to experience a change in stock price of (an average of) 126% to be considered “at fair value”.

Is BBBY a good stock to buy right now?

Let's take a minute to recap everything in this analysis. Firstly, BBBY ousted their CEO over poor financial results for 2021 and in their most recent quarterly earnings release (Q1 2022) we know this to be true becasue we analyzed their financial reports) all of this is rather bad news and makes it look like BBBY is a sell. Next, we know that BBBY has no potential dilution as it stands and have experinced a quarter of buybacks returning over 12% in value back to their shareolders, this is very good news. Furthermore, we know that Tritton was ousted as CEO and now we have Interim CEO Sue Gove, who has been tasked almost solely with recovering their financials and growing their business, this is good news as it shows BBBY's commitment to posting good financials for their business and their shareholders. Next, we know that the vast majority of analysts are either "beaish" or "neutral" on the BBBY stock, I wouldn't necessarily say that this is "bad" but it is certainly not good. Lastly, we know that BBBY could be undervalued due to my (very quick) comparables analysis, however this is not "good" as there were many metrics that I couldn't use (ie. P/E) becasue a decent amount of BBBY's financial ratios were negative.

Overall, I am leaning more to the "buy" side on this one as I belive the recent dip has brought a good opportunity for growth, especially as we near their next earnings (not that I am expecting them to be great because it will take much longer than a quarter to fix BBBY's financial situation). However, if we see incremental steps in the right directionn it should help get investors and customers excited about BBBY again.

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BBBY

Bed Bath & Beyond Inc.

10.27

-8.28
-44.64%

Return

-
Position Return %
0.00
Position Return
5.04
Price When Posted

Metrics

5.56
Target Price
9/ 10
Confidence
1-3 Years
Timeframe
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