What a fantastic six months it’s been for Warby Parker. Shares of the company have skyrocketed 76%, setting a new 52-week high of $28.98. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is it too late to buy WRBY? Find out in our full research report, it’s free.
Founded in 2010, Warby Parker (NYSE:WRBY) designs, manufactures, and sells eyewear, including prescription glasses, sunglasses, and contact lenses, through its e-commerce platform and physical retail locations.
The number of stores a retailer operates is a critical driver of how quickly company-level sales can grow.
Warby Parker sported 269 locations in the latest quarter. Over the last two years, it has opened new stores at a rapid clip by averaging 20.2% annual growth, among the fastest in the consumer retail sector. This gives it a chance to scale into a mid-sized business over time.
When a retailer opens new stores, it usually means it’s investing for growth because demand is greater than supply, especially in areas where consumers may not have a store within reasonable driving distance.
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
As you can see below, Warby Parker’s margin expanded by 1.8 percentage points over the last year. This is encouraging because it gives the company more optionality. Warby Parker’s free cash flow margin for the trailing 12 months was 4.4%.
Operating margin is a key profitability metric because it accounts for all expenses keeping the lights on, including wages, rent, advertising, and other administrative costs.
Despite the consumer retail industry’s secular decline, unprofitable public companies are few and far between. Unfortunately, Warby Parker was one of them over the last two years as its high expenses contributed to an average operating margin of negative 8.2%.
Warby Parker has huge potential even though it has some open questions, and with the recent surge, the stock trades at 94.1× forward price-to-earnings (or $28.98 per share). Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
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