Signet Jewelers Stock To $63?

Signet Jewelers (SIG) stock has jumped 14% during the past day, and is currently trading at $89.56. Our multi-factor assessment suggests that it may be time to sell SIG stock. We have, overall, a pessimistic view of the stock, and a price of $63 may not be out of reach. We believe there are several things to fear in SIG stock given its overall weak operating performance and financial condition. This isn’t appropriately reflected in the stock’s moderate valuation which is why we think it is unattractive.

Below is our assessment:

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Let’s get into details of each of the assessed factors but before that, for quick background: With $3.7 Bil in market cap, Signet Jewelers provides retail jewelry services across North America and internationally, operating 2,854 stores and kiosks, and engages in purchasing and polishing rough diamonds.

[1] Valuation Looks Moderate

This table highlights how SIG is valued vs broader market. For more details see: SIG Valuation Ratios

[2] Growth Is Very Weak

• Signet Jewelers has seen its top line shrink at an average rate of -5.1% over the last 3 years
• Its revenues have fallen -0.4% from $6.8 Bil to $6.8 Bil in the last 12 months
• Also, its quarterly revenues grew 3.1% to $1.4 Bil in the most recent quarter from $1.3 Bil a year ago.

This table highlights how SIG is growing vs broader market. For more details see: SIG Revenue Comparison

[3] Profitability Appears Weak

• SIG last 12 month operating income was $550 Mil representing operating margin of 8.1%
• With cash flow margin of 10.6%, it generated nearly $723 Mil in operating cash flow over this period
• For the same period, SIG generated nearly $145 Mil in net income, suggesting net margin of about 2.1%

This table highlights how SIG profitability vs broader market. For more details see: SIG Operating Income Comparison

[4] Financial Stability Looks Moderate

• SIG Debt was $1.2 Bil at the end of the most recent quarter, while its current Market Cap is $3.7 Bil. This implies Debt-to-Equity Ratio of 31.5%
• SIG Cash (including cash equivalents) makes up $235 Mil of $5.4 Bil in total Assets. This yields a Cash-to-Assets Ratio of 4.3%

[5] Downturn Resilience Is Very Weak

SIG has fared much worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• SIG stock fell 54.2% from a high of $109.80 on 18 November 2021 to $50.25 on 24 May 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is $109.49 on 2 June 2024 , and currently trades at $89.56

 
2020 Covid Pandemic

• SIG stock fell 80.6% from a high of $30.13 on 16 January 2020 to $5.84 on 23 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 23 November 2020

 
2008 Global Financial Crisis

• SIG stock fell 88.3% from a high of $51.64 on 7 May 2007 to $6.06 on 2 February 2009 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 25 October 2012

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read SIG Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

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