Next Plc : Overvalued relative to peers, but may deserve another look

Next Plc relative valuation is now OVERVALUED. It was previously rated NEUTRAL, and has a fundamental analysis score of 69.

Our analysis is based on comparing Next Plc with the following peers – Marks and Spencer Group plc Sponsored ADR, American Eagle Outfitters, Inc., Abercrombie & Fitch Co. Class A, Aeropostale, Inc. and Esprit Holdings Limited Sponsored ADR (MAKSY-US, AEO-US, ANF-US, AROPQ-US and ESPGY-US).

Relative Valuation

Next Plc’s price of USD 26.20 is greater than CapitalCube’s implied price of USD 22.13. At this level, CapitalCube believes that Next Plc is overvalued. Over the last 52 week period, the stock has fluctuated between USD 23.68 and USD 40.98.

Relative Valuation

Company Overview

  • From a peer analysis perspective, relative outperformance last month is up from a median performance last year.
  • It currently trades at a Price/Book ratio of (12.00).
  • We classify NXGPY-US as Harvesting because of the market’s relatively low growth expectations despite its relatively high returns.
  • NXGPY-US has relatively high profit margins while operating with median asset turns.
  • Compared with its chosen peers, the company’s annual revenues and earnings change at a slower rate, implying a lack of strategic focus and/or lack of execution success.
  • NXGPY-US‘s return on assets currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • The company’s relatively high pre-tax margin suggests tight control on operating costs versus peers.
  • While NXGPY-US‘s revenue growth in recent years has been above the peer median, the stock’s P/E ratio is less than the peer median suggesting that the company’s earnings may be peaking and the market expects a decline in its growth expectations.
  • The company’s level of capital investment seems appropriate to support the company’s growth.
  • NXGPY-US has the financial and operating capacity to borrow quickly.

Investment Outlook

Next Plc has a fundamental score of 69 and has a relative valuation of OVERVALUED.

Next Plc appears on the top right hand quadrant of CapitalCube’s Value – Price Matrix. We classify this as ‘Safety’. In other words, Next Plc has a relatively high Fundamental Analysis score of 69, while being potentially overvalued and trading higher than its CapitalCube Implied Price of 22.13. There might be some safety in this stock where it’s fundamental strength perhaps justifies its relatively higher price.

Fundamentals Vs Relative Valuation

Quadrant label definitions. Hover to know more

Safety, Value Play, Value Trap, Speculative

Drivers of Valuation

NXGPY-US has a Harvesting profile relative to its peers.

We classify NXGPY-US as Harvesting because of the market’s low expectations of growth (P/E of 9.17 compared to peer median of 24.67) despite its relatively high returns (ROE of 154.95% compared to the peer median ROE of 3.08%).

The company currently trades at a Price/Book ratio of 12.00.

Valuation Drivers

Quadrant label definitions. Hover to know more

Outperforming, Harvesting, Challenged, Turnaround

NXGPY-US has moved to an Harvesting from a relatively high ROE profile at the prior year-end.

ROE % (On Common Equity)
Price To Earnings

Peer Analysis

A complete list of valuation metrics is available on the company page.

Company Profile

Next Plc owns and operates retail stores. It offers fashionable accessories for men, women and children along with home wares. It operates through following segments: NEXT Retail, NEXT Directory, NEXT International Retail, NEXT Sourcing and Lipsy. The NEXT Retail segment engages in the retailing of fashion and home products. The NEXT Directory segment involves in home shopping, including international online. The NEXT International Retail segment comprises franchised stores around the world. The NEXT Sourcing segment designs, sources and buys NEXT branded products. The Lipsy segment designs and sells its own branded younger women’s fashion products. The company was founded by Hepworth Joseph in 1864 and is headquartered in Leicester, the United Kingdom.

Disclaimer

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