Is Best Buy Overvalued?
No, Best Buy (NYSE: BBY), doesn’t look overvalued. As per Trefis, the price estimate of Best Buy’s stock is $76, which is similar to its current market price.
Best Buy provides products and services to their customers that address key human needs across a range of areas, including entertainment, productivity, communication, food preparation, security, and health and wellness. They have operations in the U.S., Canada, and Mexico.
Trefis has a price estimate of $76 for Best Buy’s stock. We have detailed the key components of Best Buy’s Valuation in an interactive dashboard, Best Buy Valuation: Cheap or Expensive? along with our forecast for the full year 2020.
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#1 Estimating Best Buy’s Revenues
- Total Revenue for Best Buy has seen a continuous increase over the years. It grew from $39.4 billion in FY 2017 to $42.9 billion in FY 2019. Trefis estimates revenue to be $43.5 billion for FY 2020 (ended January 2020).
- Best Buy Domestic Segment is the highest contributor to Total revenues and has a good growth over recent years. It grew from $36.2 billion in FY 2017 to $39.3 billion in FY 2019. Trefis estimates revenue to be $39.9 billion for FY 2020 (ended January 2020).
- Revenue from Best Buy International has seen a steady growth over recent years. It grew from $3.2 billion in FY 2017 to $3.6 billion in FY 2019. Trefis estimates revenue to be nearly flat at around $3.6 billion for FY 2020 (ended January 2020).
#2 Estimating Best Buy’s Net Income
- The company has seen a continuous increase in Net Income margins over the last few years. Trefis estimates the margin to be around 3.53% for FY 2020 (ended January 2020).
#3 Deriving Best Buy’s EPS Figure
- Best Buy has regularly invested in share repurchases to boost shareholder returns. Shares outstanding are likely to be around 266.4 million at the end of FY 2020.
- This would enable it to report an EPS figure of $5.77 in 2020.
#4 Estimating Best Buy’s Share Price using P/E multiple
- We expect Best Buy to achieve earnings of $5.77, which coupled with our P/E multiple of 13.2x works out to a price estimate of $76.
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