What is SFIX's Intrinsic value?

Stitch Fix Inc (SFIX) Intrinsic Value Analysis

Executive Summary

As of June 1, 2025, Stitch Fix Inc's estimated intrinsic value ranges from $1.25 to $12.47 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $12.47 +182.0%
Discounted Cash Flow (5Y) $1.25 -71.7%
Dividend Discount Model (Multi-Stage) $1.85 -58.1%

Is Stitch Fix Inc (SFIX) undervalued or overvalued?

With the current market price at $4.42, the stock appears to be significantly undervalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Stitch Fix Inc's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.79 1.07
Cost of equity 7.5% 10.9%
Cost of debt 5.0% 5.0%
Tax rate 1.3% 19.7%
Debt/Equity ratio 1 1
After-tax WACC 6.2% 7.4%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 6.8% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $1,337 (FY08-2024) to $1,707 (FY08-2034)
  • Net profit margin expansion from -9% to 6%
  • Capital expenditures maintained at approximately 2% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $1 $48M 261.5%
10-Year Growth $12 $1,492M 92.5%
5-Year EBITDA $1 $5M 1816.0%
10-Year EBITDA $3 $332M 66.1%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 0.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 9.2%
  • Long-term growth rate: 4.0%
  • Fair value: $1.85 (-58.1% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 10.9% (Low) to 7.5% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $(5) to $(20)
  • Selected fair value: $-12.33 (-378.9% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $569M
Enterprise Value $456M
Trailing P/E 0.00
Forward P/E 0.00
Trailing EV/EBITDA 4.20
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.97

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 40% $3.74
Discounted Cash Flow (5Y) 33% $0.31
Dividend Discount Model (Multi-Stage) 27% $0.37
Weighted Average 100% $5.90

Investment Conclusion

Based on our comprehensive valuation analysis, Stitch Fix Inc's weighted average intrinsic value is $5.90, which is approximately 33.4% above the current market price of $4.42.

Key investment considerations:

  • Strong projected earnings growth (-9% to 6% margin)

Given these factors, we believe Stitch Fix Inc is currently significantly undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.