Dillard’s (DDS): Evaluating the Retailer’s Valuation Following the Sydney Silverman Capsule Collection Launch

Dillard's (DDS) just announced a partnership with style influencer Sydney Silverman for a limited-edition Gianni Bini capsule collection. Launching soon in stores and online, this collaboration highlights Dillard's focus on fresh and fashion-forward offerings.

See our latest analysis for Dillard's.

After a red-hot stretch, Dillard's continues to show strong momentum as shares climbed more than 28% in the past three months alone. While the recent Sydney Silverman launch has turned heads, Dillard’s broader performance stands out even more with a staggering 72% total shareholder return over the past year and an extraordinary 1,528% total return over five years. All this suggests investors are recognizing not just fashion collaborations but also the company's longer-term transformation story.

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Despite recent returns and the excitement around new collections, Dillard’s fundamentals are mixed. This raises the question for investors: is there more room for shares to run, or is future growth already reflected in the price?

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

Dillard's is currently trading at a price-to-earnings (P/E) ratio of 16.3x. At the last close of $600.08, shares are valued more cheaply than both the US market average (18.2x) and global multiline retail peers (19.8x). However, the stock is more expensive than its own estimated fair P/E ratio of 10.1x, highlighting a tension between peer comparisons and intrinsic valuation models.

The price-to-earnings ratio measures how much investors are willing to pay for each dollar of Dillard's earnings, providing vital context for growth expectations and current profitability. For a mature retailer, the P/E indicates market optimism for near-term performance or ongoing transformation, despite some recent declines in profit growth and projections for declining earnings ahead.

Compared to industry averages, Dillard's looks attractively priced, signaling potential value to those benchmarking against competitors. Yet, our fair value analysis suggests the market might be giving the company the benefit of the doubt relative to its fundamentals. The current multiple sits noticeably above the level that fundamentals may justify.

Explore the SWS fair ratio for Dillard's

Result: Price-to-Earnings of 16.3x (ABOUT RIGHT)

However, persistent declines in both annual revenue and net income growth could signal challenges ahead. If these trends continue, recent momentum could potentially be reversed.

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

Another View: What Does the SWS DCF Model Say?

Taking a different approach, our DCF model currently estimates Dillard’s fair value at $561.88, which is lower than today’s market price. This suggests that, from a cash flow perspective, the stock may be a bit ahead of itself. Does this mean the market is too optimistic, or is there more growth in store?

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 832 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’d like to take a different perspective or dive deeper on your own, you can easily build your own analysis in just a few minutes, your way with 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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