Should you buy Victoria’s Secret stock after announcing a $250 million buyback plan?

By:
on Dec 30, 2021
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  • Victoria’s Secret shares on Thursday surged nearly 3%.
  • The company announced a $250 million buyback plan on Wednesday.
  • The stock trades at an attractive forward P/E ratio of 7.56.

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On Thursday, Victoria’s Secret & Co (NYSE:VSCO) shares surged nearly 3% after announcing a $250 million buyback plan on Wednesday. The company also reaffirmed its fiscal fourth-quarter outlook, issued in line with expectations.

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The company expects fiscal Q4 earnings per share in the range of $2.35-$2.65, in line with the consensus for analyst estimates of $2.63. In addition, Victoria’s Q$ revenue guidance of $2.10 billion to $2.163 billion matches the average analyst estimate of $2.14 billion.

Victoria’s Secret looks undervalued

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From a valuation perspective, Victoria’s Secret shares trade at an attractive forward P/E ratio of 7.56, making the stock a compelling option for value investors. In addition, analysts expect its earnings per share to grow by 92% this year. 

Therefore, the stock could also gain the attention of growth investors.

The stock has gained more than 31% since going public in July, thereby outperforming the S&P 500 Index, which is up just over 10%.

Source – TradingView

Technically, Victoria’s Secret shares seem to be trading within a sharply ascending channel formation in the intraday chart. As a result, the stock has rocketed to trade closer to the trendline resistance, creating an opportunity for a pullback.

However, given the company’s exciting valuation of 7.56 in the forward P/E ratio, investors could still target extended gains deep into overbought conditions at about $58.82, or higher at $61.94, while $52.33 and $48.72 are crucial support zones.

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