Investors have gone sour on Bed Bath & Beyond (BBBY) in 2014. Its stock has declined just short of 24% during the year and dropped more than 6% after the company reported its fourth-quarter earnings.

BBBY Chart

Bed Bath & Beyond data by YCharts

Fourth-quarter earnings equaled Wall Street's consensus estimate, but the company's revenue fell short. Bed Bath & Beyond's quarterly earnings per share were $1.60 versus $1.68 in the year-ago quarter. Revenue also declined to $3.2 billion compared to revenue of approximately $3.4 billion in the year-ago period, a decrease of 5.8%.

Wall Street's disappointment, Bed Bath & Beyond's falling stock price, and the company's recent quarter have created a buying opportunity for value-hungry investors. Bed Bath & Beyond's stock now trades at an attractive valuation compared to its larger competitors Wal-Mart Stores (WMT 1.49%) and Target (TGT 0.59%) in addition to its smaller rivals Williams-Sonoma (WSM -7.92%) and Pier 1 Imports (PIRRQ).



Forward P/E

5-yr. PEG



Bed Bath & Beyond






Wal-Mart Stores


















Pier 1 Imports






Source: Morningstar

The declines have created a buying opportunity
Compared to its competitors, Bed Bath & Beyond is a bargain on a trailing-12 month earnings basis. Its P/E of 13 is the lowest among its large and small competitors contrasted here, and it is significantly lower than the S&P 500 index's P/E of 18. On a forward-looking basis, Bed Bath & Beyond's P/E of 12 is also the lowest among its competitors. Three of the companies are relatively close on a forward P/E basis though, with Target, Pier 1, and Wal-Mart also offering a good value on this basis.

Bed Bath & Beyond is similar to Target and Pier 1 when looking forward five years and considering analysts' growth estimates for that period.

Wal-Mart and Williams-Sonoma seem a little pricey, considering a five-year PEG ratio with a value of 1 indicates fair value and less than 1 indicates a discount. Therefore, Bed Bath & Beyond, Wal-Mart, and Pier 1 look undervalued when considering their five-year growth estimates and their resultant PEG values of 1.

On a book value basis, Target stands alone with a P/B of 2; it is followed by Bed Bath & Beyond and Wal-Mart, with P/B ratios of 3. The real value of these companies, though, is in their ability to sell their products and not the value of their real estate or sitting inventory. I believe valuation metrics evaluating their earnings ability such as P/E, forward P/E, and PEG are more important for these particular retailers.

Even more important than earnings or book value is the tangible and economically significant ability of these companies to generate cash. On that basis, Target trades at a significant discount compared to the other companies, with a P/CF of 6. Target's low cash flow multiple is most likely a result of its recent data-breach woes. Target is followed by Bed Bath & Beyond, with a P/CF of 10; this is also cheaper compared to the other companies' P/CF but still significantly higher than Target's.

Recent results are not an indication of the future
Investors should not be too alarmed by Bed Bath & Beyond's last quarter, as its stores took a one-time hit from the weather. The company was forced to close a store 464 times for a full day in its last quarter and 1,923 times for part of the day. Bed Bath & Beyond estimates that those closings reduced earnings per share by $0.06 to $0.07.

Furthermore, 2013's fourth quarter had one less week than 2012's. Therefore, a combination of weather and a shorter reporting period -- one-time events -- negatively affected Bed Bath & Beyond's earnings and revenue. Those events should not be factored into future quarters or be taken as an indication of Bed Bath & Beyond's future.

Nonetheless, the quarter furthered Bed Bath & Beyond's drop but has created a cheap investment for value-conscious investors. Although not the lowest in all valuation metrics explored here, Bed Bath & Beyond offers an overall attractive valuation for investors seeking a bargain; the company thinks so too, as it repurchased 7.5 million shares in the 2013 fourth quarter for an aggregate value of $532 million.

Bed Bath & Beyond also has $1.1 billion remaining in its share-repurchase program, so long-term investors will benefit both from purchasing the stock themselves and from Bed Bath & Beyond buying back shares.