Bath & Body Works Inc. (BBWI)

FairStock Score: 77/100 — HIGH CONVICTION

Key Financials

Strengths

• Generates $758 million in annual free cash flow (18.5% yield on market cap)
• Strong Piotroski F-Score of 9/9 indicating robust financial health across profitability, leverage, and efficiency metrics
• Attractive 4.5% dividend yield providing steady income returns
• FairStock composite score of 77/100 places it in the top tier across value, quality, and momentum factors

Concerns

• Revenue declining at 2.3% year-over-year signals potential demand weakness or market share loss
• Altman Z-Score of 1.0 places it in the financial distress zone—elevated bankruptcy risk

AI Analysis

Bath & Body Works Inc. is a small-cap consumer cyclical company valued at $4.1 billion. The business generates $7.3 billion in annual revenue with a 5.5% net margin and $758 million in free cash flow. From a quality standpoint, Bath shows near-perfect Piotroski F-Score of 9/9 indicating exceptional financial health and distressed Altman Z-Score of 1.0 warrants caution. On valuation, the stock is deeply undervalued on a P/E basis at 5.5x, with strong 19.8% free cash flow yield. Growth dynamics show revenue growing at -2.3% and profit growth of -11.0%. The 4.5% dividend yield adds an income component for patient holders. Our composite FairStock Score of 77/100 reflects strong fundamentals overall. Investors should weigh the business quality against the current price and their own margin of safety requirements.

Bull Case

Improving fundamentals and sector tailwinds could drive meaningful earnings growth, compressing the effective multiple for patient investors. With $758 million in annual free cash flow (18.5% yield), management has ample capital for buybacks, dividends, or accretive acquisitions.

Bear Case

Macro headwinds or sector-specific disruption could pressure margins, particularly if competitive intensity increases in the consumer cyclical space. Regulatory changes, input cost inflation, or demand normalization represent underappreciated risks that could materially impact forward estimates.

Data from SEC filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer