Victoria's Secret (VSCO) is back in focus after major shareholder BBRC International escalated its proxy fight. The investor is urging shareholders to vote against board chair Donna James and current executive pay at the upcoming annual meeting.

The governance fight has arrived after a strong run in total shareholder return over the past year of 94.99%, even as the stock has lost momentum recently with the 90 day share price return down 21.49% and the year to date share price return down 13.87% from the latest close of US$45.96.

If you are weighing how governance stories can reshape retail stocks, it can help to widen your watchlist with other ideas such as 19 top founder-led companies

With the stock up very strongly over the past year but easing off in recent months, activist pressure building, and shares trading below some valuation estimates, you have to ask yourself: Is this a reset buying opportunity, or is the market already pricing in future growth?

Most Popular Narrative: 29.9% Undervalued

Victoria's Secret's most followed valuation narrative places fair value at about $65.56, compared with the recent close at $45.96, framing the current proxy fight against a backdrop of a company that some models see as materially undervalued.

The ongoing transformation of Victoria's Secret toward inclusivity, body positivity, and enhanced storytelling continues to resonate with younger customers and drive new customer acquisition, especially among the 18-44 demographic, supporting sustained revenue and market share growth.

Want to see what sits behind that valuation gap? The narrative leans heavily on faster earnings growth, improving margins, and a different future profit multiple than today.

Result: Fair Value of $65.56 (UNDERVALUED)

However, the bullish valuation story still hinges on two big swing factors: tariffs squeezing margins further, and brick and mortar exposure if mall traffic weakens.

Another View: Market Multiple Sends a Different Signal

There is a catch. On a simple P/E basis, Victoria's Secret trades at about 22.7x, which is richer than both the US Specialty Retail industry at 19.2x and a peer group average of 12.6x. Yet the fair ratio is estimated at 31.1x, suggesting the market could shift higher rather than lower.

If earnings play out closer to analyst expectations, the key question is whether investors will keep paying this premium or push the P/E closer to that fair ratio instead, changing the risk and reward balance from here.

Next Steps

If this mix of optimism and concern feels finely balanced, it is worth reviewing the underlying data now and deciding where you stand based on the full 3 key rewards and 2 important warning signs

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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.