As part of our ongoing series at The Acquirer’s Multiple, each week we spotlight a stock from our Stock Screeners that might be a deeply undervalued gem hiding in plain sight. This week’s spotlight is Bath & Body Works, Inc. (BBWI) — a specialty retailer with one of the strongest consumer brands in the personal care and home fragrance categories, supported by a highly profitable direct-to-consumer model and a disciplined capital return program.
Business Overview
Bath & Body Works operates a network of over 1,700 stores in North America and a growing international presence through franchise partners. The company sells lotions, soaps, body care, candles, and home fragrances — categories with habitual repeat purchasing and strong brand loyalty.
BBWI’s vertically integrated model (in-house product design, marketing, and supply chain coordination) allows it to deliver high-margin, fast-turnover products while rapidly responding to consumer trends. Despite retail headwinds, BBWI consistently produces strong operating margins, robust free cash flow, and aggressive buybacks that have materially shrunk the share count over time.
What Is IV/P (Intrinsic Value to Price)?
IV/P tells you whether a stock offers more intrinsic value than the price you’re paying. The ratio blends earnings power, reinvestment efficiency, and capital-return policy to estimate a conservative measure of worth.
IV/P > 1 → Undervalued
IV/P < 1 → Overvalued
BBWI’s IV/P = 1.40, meaning intrinsic value is estimated to be ~40% higher than the current market price — a strong signal of undervaluation.
Supporting Metrics
| Metric | Value |
|---|---|
| Market Cap | ≈ US$ 4.3B |
| Enterprise Value | ≈ US$ 9.2–9.5B |
| Free Cash Flow (TTM) | ≈ US$ 946M |
| FCF Yield | ≈ 10–11% on EV |
| Acquirer’s Multiple | 7.20 |
BBWI’s AM of 7.2 places it directly in classic deep-value territory. The market appears to be pricing in stagnant growth and pressured margins — yet the company is still producing strong cash flow and shrinking the share base.
Revenue & Profitability
| Metric | TTM |
|---|---|
| Revenue | US$ 7.35B |
| Operating Income | US$ 1.20B |
| Operating Margin | ≈ 16% |
| Net Income | US$ 699M |
| Net Margin | ≈ 9.5% |
| Diluted EPS (TTM) | 3.23 |
BBWI remains solidly profitable. Revenue has been stable, while cost discipline supports durable margins. Even in a challenging consumer environment, BBWI continues to deliver substantial earnings and cash flow.
Balance Sheet Strength
| Item | Value |
|---|---|
| Cash & Equivalents | ≈ US$ 674M |
| Total Debt | ≈ US$ 4.96B |
| Net Debt | ≈ US$ 3.21B |
| Shareholders’ Equity | ≈ –1.38B |
BBWI operates with negative equity due to years of aggressive share repurchases — similar to companies like AutoZone or McDonald’s. Liquidity remains adequate, and free cash flow easily services debt and buyback commitments.
Capital Returns
| Metric | Value |
|---|---|
| Buybacks (TTM) | ≈ US$ 396M |
| Free Cash Flow (TTM) | ≈ US$ 946M |
| Dividend | Not currently paid (focus on repurchases) |
BBWI prioritizes buybacks over dividends — a high-ROI strategy when intrinsic value exceeds the share price. With an IV/P of 1.40, buybacks at these levels meaningfully increase per-share value.
Why BBWI Might Be Undervalued
Several factors point toward a mispricing:
- The market is overly discounting consumer cyclicality and retail pessimism.
- Despite macro softness, BBWI continues to generate strong, consistent FCF.
- The brand’s pricing power remains intact, supported by habitual shopping behavior.
- Negative equity is the result of long-term buybacks — not financial distress.
- An IV/P of 1.40 signals a substantial discount to intrinsic value.
- An AM of 7.2 suggests the business is being priced like a no-growth retailer, despite its high margins and stable revenue base.
Conclusion
With an IV/P of 1.40, a highly attractive Acquirer’s Multiple of 7.20, and nearly US$ 1B of annual free cash flow, Bath & Body Works (BBWI) screens as a compelling undervalued opportunity in specialty retail. Its strong brand equity, consistent profitability, and aggressive buybacks provide multiple avenues for long-term value creation.
For value investors seeking a cash-generative consumer business trading at a meaningful discount to intrinsic value, BBWI may represent a surprisingly durable and mispriced opportunity.
For all the latest news and podcasts, join our free newsletter here.
Don’t forget to check out our FREE Large Cap 1000 – Stock Screener, here at The Acquirer’s Multiple:
