According to market analysis firm Seeking Alpha, Signet’s management seems to be doing all the right things - whether it's making smart acquisitions, divesting a risky sub-prime financing business, shutting underperforming stores, or maintaining strong margins.
Signet Jewelers has aggressively consolidated its position as the largest retail player in the diamond and jewelry industry over the last 24 months. Signet traditionally focuses the middle of the market (sales between $500 - $10,000), but has its sights set on the next tier up with its recent acquisition of Blue Nile, the purchase of which was completed in August 2022.
Signet, with its international size, is a DeBeers Sightholder. Thus, it can be reasonable expected that Blue Nile’s gross margins will benefit immediately from Signet’s worldwide industry reach.
Signet has only $147M of long-term debt, and roughly $900M cash on hand, as well as $2.1B in inventory. Signet kicked off $1.1B in free cash flow for 2021, with a market cap of a little over $2B. Trailing 12-month FCF is around $500M. Signet has a 5-year forward P/E average of 10.1x.
The online analyst states: “let's take a bit of allowance for a deteriorating macro environment and shave the estimated EPS a bit to $8.87. Doing so with a historical forward P/E of 10.1x puts us at a target price of $89, a roughly 50% upside from the price today.”
Source: Seeking Alpha
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