Bed Bath & Beyond Inc. (BBBY) is a retail store chain. 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, and general home furnishings, consumables, and various juvenile products.

The stock is down 79.7% in price over the past year and 55.6% year-to-date to close yesterday’s trading session at $6.47. In addition, its shares are currently trading 83.5% below their 52-week high of $39.30, which they hit on June 27, 2021.

BBBY’s product-related margin expansion associated with its Owned Brands, pricing, and promo optimization were offset by mounting supply chain costs in the last reported quarter. Moreover, rising inflation and geopolitical tensions have weighed on investor confidence.

Here's what could shape BBBY's performance in the near term:

Weak Financials

During the fourth quarter ending February 26, 2022, BBBY’s net sales decreased 21.7% year-over-year to $2.05 million. Its operating loss increased 600% from its year-ago value to $165.48 million, while its net loss came in at $159.11 million compared to a net income of $9.06 million in its previous period. The company’s loss per share amounted to $1.79 compared to an EPS of $0.08 in the prior-year quarter.

Poor Profitability

BBBY’s 33.31% trailing-12-month gross profit margin is 8.1% lower than the 36.25% industry average. Its 2.72% trailing-12-month EBITDA margin is 77.5% lower than the 12.11% industry average. Also, its 0.23% trailing-12-month levered FCF margin is 93.4% lower than the 3.45% industry average. ROA, ROE, and ROC are negative 10.91%, 77.13%, and 1.3%, respectively.

Weak Growth Prospects

Wall Street analysts expect BBBY’s revenues to decline 21.9% year-over-year in the first quarter ending May 2022, while its EPS is expected to remain negative in the third quarter. Furthermore, analysts expect its EPS to decline 53.3% over the next five years. Its revenue and EBITDA have declined at CAGRs of 13.2% and 34.5%, respectively, over the past three years.

Premium Valuation

In terms of forward EV/EBITDA, the stock is currently trading at 62.90x, 643.5% higher than the industry average of 8.46x. Also, its trailing-12-months Price/Book of 3.03x is 52.5% higher than the industry average of 1.99x. Moreover, BBBY’s trailing-12-months Price/Cash flow of 28.78x is 179.1% higher than the industry average of 10.31x.

POWR Ratings Reflect Bleak Outlook

BBBY has an overall D rating, equating to Sell in our proprietary POWR Ratings system. The POWR ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. BBBY has an F grade for Stability and Sentiment and a D for Growth. The stock’s 1.83 beta is in sync with the Stability grade. The disappointing consensus earnings estimate justifies the Sentiment grade. In addition, the company’s poor financials and negative CAGRs are consistent with the Growth grade.

Of the 63 stocks in the C-rated Home Improvement & Goods industry, BBBY is ranked #57.

Beyond what I’ve stated above, you can view BBBY ratings for Quality, Value, and Momentum here.

Bottom Line

BBBY’s shares have plummeted 32.9% over the past month. The current market headwinds like rising inflation, supply chain disruptions, and geopolitical uncertainties have adversely affected the stock. The company’s poor financial results could make investors concerned. In addition, the stock is currently trading below its 50-day and 200-day moving averages of $12.88 and $17.15, respectively, indicating a downtrend. So, we think the stock is best avoided now.

How Does Bed Bath & Beyond Inc. (BBBY) Stack Up Against its Peers?

While BBBY has an overall D rating, one might want to consider its industry peers, Acuity Brands, Inc. (AYI), which has an overall A (Strong Buy) rating, and Builders FirstSource, Inc. (BLDR), and Haverty Furniture Companies, Inc. (HVT) which have an overall B (Buy) rating.

BBBY shares were trading at $6.44 per share on Tuesday afternoon, down $0.03 (-0.46%). Year-to-date, BBBY has declined -55.83%, versus a -21.12% rise in the benchmark S&P 500 index during the same period.

Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.

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