A Look at Dillard's (DDS) Valuation After Sydney Silverman Gianni Bini Collaboration Announcement

Dillard's (DDS) just announced a collaboration with digital style influencer Sydney Silverman, unveiling the limited-edition Gianni Bini x Sydney Silverman capsule set to launch in November. This partnership could help the retailer reach younger shoppers who are eager for trend-driven collections.

See our latest analysis for Dillard's.

Dillard's recent team-up with Sydney Silverman follows their annual commitment to Ronald McDonald House Charities, showing the retailer isn't just innovating on the fashion front but also remains active in its philanthropic efforts. Its share price has surged 33.6% year-to-date, while the one-year total shareholder return is an eye-popping 67%, highlighting strong momentum that stands out in the retail sector despite recent softer monthly moves.

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But with Dillard's shares soaring and trading well above analyst price targets, investors may wonder if there is still real value left for new investors or if the market has already factored in all of the company's future prospects.

Price-to-Earnings of 16.3x: Is it justified?

With Dillard's shares closing at $602.03, its price-to-earnings ratio of 16.3x stands below average compared to both the broad US market and peers, suggesting the market may be undervaluing the company’s earnings strength.

The price-to-earnings ratio (P/E) measures how much investors are willing to pay for a dollar of earnings. For retailers like Dillard's, the P/E is a closely-watched yardstick of how the market values a company’s profitability and growth prospects.

Dillard’s P/E ratio of 16.3x undercuts both the US market average (18.8x) and the global multiline retail industry average (21.6x). This suggests the market is discounting its earnings relative to peers. However, when benchmarked against the estimated fair price-to-earnings ratio of 10.2x for Dillard’s, there is a notable premium that could suggest future expectations may be running ahead of fundamentals. This is a level the market could move towards over time.

Explore the SWS fair ratio for Dillard's

Result: Price-to-Earnings of 16.3x (OVERVALUED)

However, continued declines in annual revenue and net income could spark concerns about the sustainability of Dillard's current valuation.

Find out about the key risks to this Dillard's narrative.

Another View: Our DCF Model Challenges the Market

Looking at Dillard’s through the lens of our DCF model adds another perspective. The SWS DCF model estimates shares are trading about 7% above fair value ($602 vs $564.72), which suggests the stock may be overvalued by this approach. Does this signal caution for future returns, or is the market pricing in something more?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Dillard's for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Dillard's Narrative

If you see things differently or want to delve deeper on your own terms, you can assemble your personal view and analysis in just a few minutes. Do it your way.

A great starting point for your Dillard's research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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