Grill maker Weber Inc. (WEBR) recently reported disappointing fourth-quarter results. Its revenues missed Street estimate by 9%, and a loss per share of $0.19 was worse than the $0.12 consensus estimate. In addition, JPMorgan analysts downgraded the stock to Neutral from Overweight. They lowered the price target to $9.50 from $13, citing the uncertainty of a high sale ahead with risk in the second half of 2022 on price elasticity and do-it-yourself “normalization.”

The stock has lost 25% over the past three months and is currently trading 45% below its 52-week high of $20.44, which it hit on August 10, 2021. Moreover, the inflationary headwinds and supply chain challenges make the company’s near-term prospects bleak.

Here’s what could influence WEBR’s performance in the upcoming months:

Disappointing Financials

For the fiscal first quarter ended December 31, 2021, WEBR’s net sales declined 8% year-over-year to $283 million. The company’s gross profit for the quarter decreased 53% year-over-year to $64 million. In comparison, its adjusted EBITDA loss came in at $36 million, compared to an income of $38 million in the prior-year period. Its adjusted net loss came in at $46 million, compared to a gain of $13 million in the year-ago period.

Stretched Valuation

In terms of forward non-GAAP PEG, WEBR’s 2.08x is 142.7% higher than the industry average of 0.86x. Likewise, its forward P/CF of 19.96x is 91.9% higher than the industry average of 10.40x. Moreover, the stock’s forward non-GAAP P/E of 21.67x is 64.3% higher than the industry average of 13.19x.

Low Profitability

In terms of trailing-12-month EBITDA margin, WEBR’s 0.68% is 94.6% lower than the industry average of 12.53%. Likewise, its trailing-12-month levered FCF margin of 1.03% is 81.6% lower than the industry average of 5.62%. Moreover, the stock’s trailing-12-month net income margin of 3.05% is 53.6% lower than the industry average of 6.56%.

POWR Ratings Reflect Bleak Prospects

WEBR has an overall rating of D, which equates to a Sell in our POWR Rating system. The POWR Ratings are calculated by accounting for 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. WEBR has a C grade for Quality, in sync with its lower-than-industry profitability ratios. In addition, WEBR has a C grade for Value, in sync with its higher-than-industry valuation ratios.

WEBR also has a C grade for Growth and an F grade for Sentiment. This is justified as analysts expect its EPS to decline 99.8% in the next quarter and 17.9% in the current year.

Moreover, the stock has a D grade for Momentum, consistent with its 36.3% decline over the past six months.

WEBR is ranked #52 out of 62 stocks in the Home Improvement & Goods industry. Click here to access WEBR’s rating for Stability.

Bottom Line

WEBR is currently trading below its 200-day moving average of $14.11, indicating a downtrend. Moreover, it could keep losing in the near term due to concerns over input price inflation and high freight costs. The stock looks overvalued at the current price level and I believe it is best to currently avoid it.

How Does Weber (WEBR) Stack Up Against its Peers?

While WEBR has an overall POWR Rating of D, you might want to consider investing in the following Home Improvement & Goods stocks with an A (Strong Buy) or B (Buy) rating: Acuity Brands, Inc. (AYI), Duluth Holdings Inc. (DLTH), and HNI Corporation (HNI).

WEBR shares were trading at $11.18 per share on Friday afternoon, up $0.59 (+5.57%). Year-to-date, WEBR has declined -13.53%, versus a -8.11% rise in the benchmark S&P 500 index during the same period.

About the Author: Nimesh Jaiswal

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...

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