WILLIAMS-SONOMA, INC. (WSM): what the price assumes

In the published model solve dated 2026-Q2, anchored at $235.09, WILLIAMS-SONOMA, INC. (WSM) is priced for +24.7% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-06-28.

Generated: 2026-08-31 · Source: https://boothcheck.com/report/WSM

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 11.8% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: within-range (limited comparison data)

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Growth Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.7%); the inversion above states its own rate.

Per-Model Detail (n=18)

Economic-Unit Decomposition (Sum Of The Parts)

Only one reportable economic unit is present in the current topology source. Consolidated operating lenses remain available, but there is no multi-unit decomposition.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

At $226.95 the price works out to roughly 22x company-wide operating income, which inverts into about 34% operating growth a year for five years. The rate is within what the company has delivered in good years; the stretch is sustaining it for five.

The business throws off remarkable returns. Operating margin runs around 18%, return on equity on a trailing basis is well above 50%, and the company holds net cash of about $650 million while shrinking its share count near 5% a year.

No standard valuation lens reaches the price. The DCF, peer-multiple, and earnings-power models all land below today's quote, with the blended estimate near $141. The bet is that the brand portfolio keeps comping positive and defending its margin in a discretionary category.

Bull Case

The moat shows up in the returns, not the slogans. Williams-Sonoma runs an operating margin around 18%, far above the specialty-retail norm, and a trailing return on equity north of 50%, the kind of profitability that only comes from real pricing power and a tightly run vertical model. The portfolio, Williams Sonoma, Pottery Barn, and West Elm, is a set of design-led brands the filing describes as bringing people together around food and home (FY2025 10-K, accession 0001628280-25-015037). The company designs its own product, controls a large e-commerce channel, and earns brand loyalty that lets it hold price where commodity furniture sellers discount. That structural advantage is why the excess-return and residual-income models, which reward a return on equity this far above the cost of capital, land well above the asset-only models.

The near-term results show the moat working through a soft demand backdrop. In the first quarter of fiscal 2026 comparable brand revenue grew 4.8%, with e-commerce comps up 4.8% and retail comps up 4.7%, and management noted every brand delivered a positive comparable result. Operating margin came in at 16.2% in the quarter and the company reiterated full-year guidance of a 17.5% to 18.1% operating margin on comps of 2% to 6%. That is a notable swing from fiscal 2025, when the filing recorded a company comp decline of 1.6% driven by customer hesitancy toward furniture purchases (FY2025 10-K, accession 0001628280-25-015037). The brand is taking share as the category recovers.

The balance sheet and capital return reinforce the quality. The company holds roughly $650 million of net cash, carries no net debt, and generated more than $1 billion of free cash flow on a trailing basis. It raised the quarterly dividend 15% to $0.76, its 17th consecutive annual increase, and has been buying back stock steadily, shrinking the share count near 5% a year. Goldman Sachs upgraded the stock to Buy with a $218 price target after a pullback, and analyst targets cluster in the $204 to $230 (June 28, 2026) range. Against discretionary peers like Ulta and Signet, Williams-Sonoma's combination of margin, return on capital, and a net-cash balance sheet is the standout, which is why the market awards it a premium multiple.

Bear Case

The balance sheet is pristine, and that is precisely what makes the fragility easy to underestimate. Net cash and a high return on equity describe the company in a normal demand environment, but the return on equity is flattered by a tiny book-equity base of about $16 per share, the product of years of aggressive buybacks. A company that has bought its book down that far has less accounting cushion to absorb a bad year, and the return on invested capital, which the model puts near 5.5%, is far more pedestrian than the headline return on equity suggests once you account for the full capital base. The earnings-power value, which capitalizes normalized operating profit with no growth, lands near $86, and the asset-anchored Graham number lands near $56. Strip out the growth assumption and the standard frames put the business well below half today's price.

The demand picture is the live risk because the product is discretionary and big-ticket. The filing's own prior-year experience is instructive: fiscal 2025 saw a company comp decline of 1.6% driven by customer hesitancy toward furniture purchases (FY2025 10-K, accession 0001628280-25-015037). Furniture and home decor are among the first purchases consumers defer when housing turnover slows or confidence dips, and a single weak holiday season can turn the recent positive comps negative. The price already assumes operating growth near 34% a year sustained for five years, and historically only about 23% of comparable fast-growers held that pace that long. The recent quarterly comp of 4.8% is healthy but nowhere near the 34% the price embeds.

The cost side carries a specific, dated threat: tariffs. Williams-Sonoma sources heavily from overseas suppliers, and the filing warns that currency devaluation or trade friction could cause foreign suppliers to demand higher prices to offset lost profits (FY2025 10-K, accession 0001628280-25-015037). Management has flagged roughly $80 million of incremental tariff cost embedded in inventory, front-loaded into the first half of fiscal 2026, which presses directly on the gross margin that supports the premium valuation. With no valuation family reaching today's price and consensus skewed toward Hold (14 Holds against 7 Buys), the downside case is a margin squeeze meeting a demand stumble, which would compress both the earnings and the multiple at once.

Valuation

No valuation family reaches the price, which is the clearest single read here. Against the $226.95 quote, the DCF perpetual-growth model lands near $113, the earnings-power value near $86, the peer P/E model near $169, the EV/EBITDA-relative model near $153, and the free-cash-flow yield near $80. The blended X-ray estimate sits near $141. Only the two-stage excess-return model, which extrapolates the trailing 58% return on equity forward, reaches above the price, and that single optimistic method is the exception that proves the rule. On assets, earnings power, peer multiples, and even forward growth, the price is rich.

Inverting the price makes the bet explicit. At today's level the market is paying about 22x company-wide operating income, which the model translates into operating growth of roughly 34% a year for five years, discounted at an 11.9% cost of capital with 4% terminal growth, where each percentage point of cost moves the implied growth about six points. The near-term growth rate is within what the company has delivered in strong years, but sustaining 34% for five straight years is the stretch, and only about 23% of comparable fast-growers managed it.

The operating-income basis the inversion prices and the EDGAR figure diverge by about 13%, so the exact multiple shifts a little with the basis, but the conclusion holds across both. This is a high-quality business trading at a price that assumes the recovery now underway compounds at an exceptional rate for years. The premium is earned by the margin and return profile; whether it is justified depends on the durability of demand in a discretionary category facing a tariff-driven cost headwind.

Catalysts

The May Q1 fiscal 2026 report was the recent catalyst and it was strong: comparable brand revenue up 4.8%, EPS of $1.93, net revenue of $1.81 billion, and every brand positive on comps, with management reiterating full-year guidance. The next quarterly report is the key event, since the price needs comps to stay positive and the operating margin to hold inside the 17.5% to 18.1% guided range while tariff costs flow through the first half.

Tariffs are the catalyst that cuts the other way. Management flagged roughly $80 million of incremental tariff cost front-loaded into the first half of fiscal 2026, so the H1 gross margin is the number to watch; if the company offsets it through pricing and supply-chain work without losing comp momentum, the bears lose their main lever. Capital return is a steady positive: the 15% dividend increase to $0.76 marks the 17th straight year of raises, and continued buybacks keep shrinking the share count. Analyst sentiment improved with Goldman's upgrade to Buy at a $218 target and Morgan Stanley's raise to $210, though the overall tape leans Hold. The chief risk to the timeline is a consumer pullback in big-ticket home goods, the same furniture hesitancy that drove the fiscal 2025 comp decline, arriving at the same time tariffs pressure margins.

Sources: Williams-Sonoma Q1 FY2026 results (IR); BusinessWire: WSM strong Q1 2026 results; 24/7 Wall St: Goldman upgrades WSM to Buy; Public.com: WSM analyst forecast; Motley Fool: WSM Q1 2026 transcript.

Peer Cohorts (Per Segment, With Filing Citations)

Williams-Sonoma (consolidated) (reported)

• RH (RH)
• FY2025 10-K: …derivative arising from convertible senior notes repurchase ​ ​ - ​ ​ - ​ ​ 405,577 Conversion of loan receivables into equity of consolidated variable interest entities ​ ​ - ​ ​ - ​ ​ 27,096 The accompanying notes are an integral part of these Consolidated Financial Statements. ​ ​ ​ ​ PART II - FINANCIAL…
• FY2025 10-K: ,649 ​ The accompanying notes are an integral part of these Consolidated Financial Statements. ​ ​ ​ ​ ​ PART II - FINANCIAL STATEMENTS FORM 10-K | 69 ​ Table of Contents RH CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ COMMON STOCK ​ ​ ​ ​ ​ ​ ​ ​ ​ ​…
• W (WAYFAIR INC.)
• FY2025 10-K: …case, an applicable margin. As of December 31, 2025, the applicable margin for Adjusted Term SOFR and Adjusted Eurocurrency Rate loans is 1.25 % per annum, the applicable margin for base rate loans is 0.25 % per annum and the applicable margin for RFR loans is 1.2826 % per annum. The applicable margin is subject to…
• FY2025 10-K: …ended December 31, 2024, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024, and the results of its operations and its…
• LZB (LA-Z-BOY INCORPORATED)
• FY2025 10-K: …of the three years in the period ended April 26, 2025, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended April 26, 2025 appearing under Item 16 (collectively referred to as the "consolidated financial statements"). We also have audited the…
• FY2025 10-K: ,031,976 (1) Non-controlling interests include dividends paid to joint venture minority partners resulting from the repatriation of dividends from our foreign earnings that we no longer consider permanently reinvested. The accompanying Notes to Consolidated Financial Statements are an integral part of these…
• SGI (SOMNIGROUP INTERNATIONAL INC.)
• FY2025 10-K: OLIDATED FINANCIAL STATEMENTS (CONTINUED) (5) Unconsolidated Affiliate Companies The Company has ownership interests in Asia-Pacific joint ventures to develop markets for Sealy® and Stearns & Foster® branded products and ownership in a United Kingdom joint venture to manufacture, market and distribute Sealy® and…
• FY2025 10-K: …includes 1,241,115 shares issuable under restricted stock units and deferred stock units. Additionally, this number includes 1,329,938 performance restricted stock units which reflects a maximum payout of the awards granted. For information regarding the material features of each of the above plans see Note 11,…
• ULTA (Ulta Beauty, Inc.)
• FY2025 10-K: …Amended and Restated Loan Agreement (as so amended, the Loan Agreement) with Wells Fargo Bank, National Association, as Administrative Agent, Collateral Agent and a Lender thereunder; Wells Fargo Bank, National Association and JPMorgan Chase Bank, N.A., as Lead Arrangers and Bookrunners; JPMorgan Chase Bank, N.A., as…
• FY2025 10-K: #8203; - Total (2) ​ $ 2,374,032 ​ $ 379,577 ​ $ 761,187 ​ $ 527,070 ​ $ 706,198 (1) These amounts are for our undiscounted lease obligations recorded in our consolidated balance sheets as operating lease liabilities. Also included are legally binding minimum lease payments for leases signed but not yet commenced of…
• SIG (SIGNET JEWELERS LIMITED)
• FY2025 10-K: …35 - 40 % of annual sales, as well as for a substantial portion of the annual operating income and cash flows. The following accounting policies have been applied consistently in the preparation of the Company's consolidated financial statements: (a) Basis of preparation The consolidated financial statements of the…
• FY2025 10-K: …recorded as a deemed dividend and a charge to net (loss) income attributable to common shareholders in the consolidated statement of operations. The Company also incurred $ 1.6 million of expenses directly related to the redemption and recorded this as an additional deemed dividend charged to net (loss) income…
• SBH (SALLY BEAUTY HOLDINGS, INC.)
• FY2025 10-K: …period. See Note 10 in the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report for additional information on legal proceedings. ITEM 4. MINE SAF ETY DISCLOSURES Not applicable - 28 - PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STO CKHOLDER MATTERS AND ISSUER…
• FY2025 10-K: Accumulated earnings 898,076 740,685 Accumulated other comprehensive loss, net of tax ( 104,848 ) ( 113,169 ) Total stockholders' equity 794,207 628,535 Total liabilities and stockholders' equity $ 2,871,096 $ 2,792,899 The accompanying notes are an integral part to these consolidated financial statements. F- 3 SALLY…
• VSCO (VICTORIA'S SECRET & CO.)
• FY2025 10-K: …the Years Ended February 1, 2025, February 3, 2024 and January 28, 2023 Notes to Consolidated Financial Statements (2) Financial Statement Schedules Schedules have been omitted because they are not required or are not applicable or because the information required to be set forth therein either is not material or is…
• FY2025 10-K: …Shareholders and the Board of Directors of Victoria's Secret & Co. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Victoria's Secret & Co. (the Company) as of February 1, 2025 and February 3, 2024, the related consolidated statements of income, comprehensive income,…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.