Best Buy Co. Inc (BBY)

Conclusion

Best Buy is a US specialty retailer of technology products and appliances, and it sells related services such as delivery, installation, repair and warranties. On 2026-11-09 the share price was 106.28 USD, giving a market capitalisation of 22.3 billion USD.

The verdict is overvalued. The P/E of 17.5 sits above its ten-year median of 13.1, and EV/EBITDA of 9.4 sits above its median of 7.1. The discounted cash flow gives 84.91 USD per share at a discount rate of 10.9%, and the fair value from historical multiples is 79.27 USD. The fair value band runs from 65.67 to 98.51 USD with a midpoint of 82.09 USD, a margin of safety of -22.8% at the current price. The reverse DCF implies growth of 4.2% a year, while revenue has fallen by 2.5% a year over five years and free cash flow per share by 18.0% a year.

What holds the case up is financial strength, with an Altman Z-score of 4.34 and interest coverage of 39.6, and free cash flow conversion of 139.0% on a trailing basis. What would break it is a thin operating margin of 4.4%, the revenue decline, and a price-to-book ratio of 7.00 against a median of 5.78.

Financial health

Financial strength is green, held up by an Altman Z-score of 4.34, interest coverage of 39.6 and net debt to EBITDA of 0.73. The current ratio of 1.12 is neutral and the quick ratio is 0.36, which means the company relies on selling inventory to meet short-term obligations. Debt to equity is 1.30. The Altman model was designed for manufacturers, and Best Buy is a retailer, so its zone of safe should be read with that in mind. Insolvency risk is low, about 2.2% by the estimate of the Ohlson model over one to two years, based on figures as of 2026-01-31.

Earnings quality

Earnings quality is green, supported by a Piotroski score of 7 out of 9, free cash flow conversion of 94.7% over five years and accruals of -6.1%, which suggests reported profits are backed by cash. Stock-based compensation is 0.3% of revenue, leaving free cash flow after it at 1.63 billion USD. The share count has fallen at a compound rate of 4.2% over five years, which points to buybacks. The Beneish M-score is not available. The company beat earnings expectations in 7 of the last 8 quarters, with an average surprise of 4.9%. Current-year estimates rose 4.2% over 90 days, with 20 upward revisions and no downward ones in the last 30 days.

Profitability

Profitability is yellow. Gross margin of 22.7% is close to its ten-year median of 22.5%, operating margin of 4.4% matches its median of 4.4%, and net margin of 3.0% compares with a median of 3.1%. Margin stability is 13.0%. Return on invested capital is 26.8% against a WACC of 9.8%, a ROIC minus WACC value of 17.0%, and its five-year median ROIC is 22.8%. Return on equity of 40.0% looks strong, but the DuPont split shows a net margin of 2.6%, an asset turnover of 2.84 and an equity multiplier of 4.95, so leverage and asset efficiency account for much of it.

Growth

Growth is red. Revenue has a compound growth rate of -3.4% over three years, -2.5% over five years and 0.5% over ten years, and it grew in 6 of the last 10 years. Earnings per share fell at -7.1% over three years and -5.9% over five years, although they rose 7.0% a year over ten years. Free cash flow per share grew 14.4% over three years, fell 18.0% over five years and grew 12.0% over ten years. Analysts expect earnings per share to grow 5.8% next year, which is a neutral signal.

Valuation

Valuation is red. Today's multiples sit above their ten-year medians: P/E of 17.5 against 13.1 (a premium of 34.1%), EV/EBITDA of 9.4 against 7.1 (32.0%), price to free cash flow of 12.6 against 11.0 (14.2%), price to sales of 0.53 against 0.39 (35.9%) and price to book of 7.00 against 5.78 (21.2%). The DCF gives 84.91 USD per share at a discount rate of 10.9%, and about 44.1% of that value sits in the terminal value. The fair value band is built on fixed assumptions, including a 5% equity risk premium and capped growth, so it is an order of magnitude and not a price target. The reverse DCF implies 4.2% growth, against revenue falling 2.5% a year and free cash flow per share falling 18.0% a year over five years. The dividend yield is 3.6%, the forward yield 4.0%, and the payout on free cash flow 45.4%.

Risks

A revenue decline, with a five-year compound rate of -2.5%, would keep pressure on margins and on the earnings per share trend. An operating margin of 4.4% leaves little room for error if sales weaken further. A quick ratio of 0.36 and a current ratio of 1.12 in the watch range mean the company depends on inventory turnover. A price-to-book ratio of 7.00 leaves the share price exposed if returns on equity fall back. Free cash flow per share has fallen 18.0% a year over five years, so the free cash flow of recent years may not be a reliable base. The Beneish M-score is not available. This analysis has no debt maturity schedule and no revenue by segment, so it cannot judge refinancing risk or which product lines drive the decline.