This Home Furnishings Company Is A Bit Too Pricey: Williams-Sonoma, Inc. (WSM)

While I think that Williams-Sonoma is a great company, it is simply too expensive right now.  The stock trades for 19.7 TTM earnings, a significant premium to peers.  For comparison, Bed, Bath, and Beyond has a P/E ratio of just 13, with nice growth projections.  Bed, Bath, and Beyond is projected to grow its earnings at an annual average of 9.7%, more than justifying its multiple.

Speaking of growth, consensus estimates call for Williams-Sonoma to grow its earnings by an average of 12% annually going forward.  While I agree that consumer spending is on an uptrend, I’m not sure that consumers are quite ready to splurge on luxury items, especially when stores like Target offer fashionable alternatives for much lower prices.

One thing that the company does have working in its favor, however, is its excellent balance sheet, which has over half a billion dollars in cash and no debt. The company also pays a decent dividend of just under 2% annually, which it has a good history of increasing.

As far as products go, I like Williams-Sonoma the best out of the companies mentioned here. They have quality merchandise and very competent leadership who have developed a good strategy. However, the stock looks a bit too expensive, especially when there are very attractively valued alternatives out there. With a bit of a pullback though, Williams-Sonoma could be a good long-term play on retail indeed.

The article This Home Furnishings Company Is A Bit Too Pricey originally appeared on Fool.com and is written by Matthew Frankel.

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