Partnership extension puts Winmark’s resale model in focus

Winmark (WINA) has extended its partnership with CCM Hockey for three years, keeping attention on the company’s resale driven model and what this sustainability themed agreement might mean for the stock.

Alongside the CCM Hockey extension, Winmark’s recent share price has been firm, with a 7 day share price return of 4.46% and a 30 day share price return of 8.94%. This supports a 1 year total shareholder return of 15.27% and a 5 year total shareholder return of 149.80%, which suggests momentum has been building rather than fading for longer term holders.

If this resale themed story has you thinking about what else might be working in markets, it could be a good moment to broaden your search and check out 20 top founder-led companies

With Winmark trading at $418.19, carrying a value score of 1 and sitting roughly 30% below an analyst price target of $545, investors now face the key question: is this a real opportunity, or is the market already pricing in future growth?

Price-to-Earnings of 36.5x: Is it justified?

On a simple headline measure, Winmark trades on a P/E of 36.5x, which investors can compare against both peers and an estimated fair level for this stock.

The P/E ratio shows how much investors are paying for each dollar of earnings, and for a franchised resale business like Winmark it often reflects expectations around the durability of royalties and fee based income. A higher multiple can indicate that the market is willing to pay up for those earnings, while a lower one can point to more muted expectations.

Compared with a peer group on 48.2x, Winmark screens as lower on this metric, which suggests the market is not assigning the same premium as to that peer set. However, the same 36.5x P/E is well above both the US Specialty Retail industry on 19.8x and an estimated fair P/E of 12.3x, a gap that implies the valuation could move closer to that lower level if sentiment or growth expectations cool.

Result: Price-to-Earnings of 36.5x (OVERVALUED)

However, investors also need to weigh risks such as any cooling in resale demand or shifts in franchisee health that could challenge Winmark’s current premium valuation.

Another view on Winmark’s valuation

While the current 36.5x P/E paints Winmark as expensive versus the US Specialty Retail industry on 19.8x and an estimated fair ratio of 12.3x, our DCF model points in the same direction, with an estimated future cash flow value of $320.92 against a share price of $418.19. If both signals are flashing rich, it raises the question of how much potential upside is already being paid for.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Winmark for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 44 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

If the mixed signals around Winmark have you on the fence, use that hesitation as a prompt to move quickly and test the numbers yourself, weighing both the concerns and the upside before making a call. Then round out your view by checking the 1 key reward and 3 important warning signs

Looking for more investment ideas beyond Winmark?

If Winmark has sharpened your focus on quality, broaden your next move by scanning other opportunities that match your risk, income, and growth preferences.

• Target potential mispricings by reviewing companies that screen as quality opportunities on the 44 high quality undervalued stocks
• Lock in the income side of your portfolio by assessing stocks with robust payouts using the 8 dividend fortresses
• Prioritise resilience by filtering for companies that score well on stability with the 71 resilient stocks with low risk scores

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.