Key Takeaways:
- Analysts value European Wax Center stock at $6.37/share today
- That’s a potential 93% upside from today’s price of $3.22/share.
- EWCZ stock has fallen to historically low valuations, trading at just 10.6x forward earnings.
- The company is expected to face a significant earnings dip in 2025 (-44.6%) before returning to strong growth.
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European Wax Center (EWCZ) operates as a franchisor and operator of out-of-home waxing services in the United States. It offers body and facial waxing services, as well as pre- and post-service products, including ingrown hair serums, exfoliating gels, brow shapers, and skin treatments, along with a range of skincare retail products.
Valued at a market cap of $140 million, European Wax Center is a small-cap stock that has declined over 90% from its all-time high. So, let’s see if EWCZ stock is a good buy at its current price.
Is European Wax Center Stock a Good Buy Right Now?
European Wax Center, a beauty franchise operator, forecasted net store closures for 2025 and characterized the year ahead as a “reset” period under new leadership.
The company, which pioneered the specialized out-of-home waxing category, expects to close between 40 to 60 locations while opening just 10 to 12 new centers this year. This marks a significant shift for a brand that had previously focused heavily on expansion.
“We were very focused on new unit expansion. And we didn’t really take the time to put the building blocks in place to support that growth,” said Chris Morris, who joined as CEO three months ago. “Our growth just simply outpaced our core capabilities around some important blocking and tackling functions.”
Morris outlined priorities including developing a data-driven marketing engine, improving franchisee support infrastructure, implementing a sophisticated development approach, and assembling a new leadership team. The company has already appointed a new CFO, Chief Commercial Officer, and Chief Information and Digital Officer.
Despite the challenges, European Wax Center’s mature centers still maintain strong economics, with average unit volumes exceeding $1 million and cash-on-cash returns of around 40%. European Wax Center remains the dominant player in its category, approximately 11 times larger than its closest competitor.
For fiscal 2025, management projects system-wide sales between $940 million and $960 million, with same-store sales growth ranging from flat to 2% positive. Revenue is expected to range from $210 million to $214 million for fiscal year 2025.
Its core guests, who account for 70% of sales, have remained stable through economic challenges, but management acknowledged difficulty attracting and retaining new customers in the current environment.
Let’s see if the retail stock is undervalued at the current price.
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What is the 2-Minute Valuation Model?
Three core factors drive a stock’s long-term value:
- Revenue Growth: How big the business becomes.
- Margins: How much the business earns in profit.
- Multiple: How much investors are willing to pay for a business’s earnings.
Expected Normalized EPS * Forward P/E ratio = Expected Share Price
Revenue growth and margins drive a company’s long-term normalized earnings per share (EPS), and investors can use a stock’s long-term average P/E multiple to get an idea of how the market values a company.
Does European Wax Center Stock Look Undervalued?
Forecast
Looking at EWCZ’s earnings forecast, we can see a volatile pattern that requires careful analysis. While the company is projected to experience a significant earnings decline in 2025, analysts forecast a strong recovery in the following years, with growth accelerating to over 30% by 2027.
This “J-curve” earnings pattern suggests current challenges may be temporary rather than structural.
This earnings recovery is likely to be driven by:
- Recurring Revenue Model: The company’s specialized waxing services create recurring customer visits, providing steady cash flow to franchisees and stable royalty income to the parent company.
- Asset-Light Business: As a franchisor, European Wax Center generates high margins and returns on capital without the capital expenditure requirements of owning and operating physical locations.
- Market Leadership: European Wax Center is the largest out-of-home waxing brand in the United States, with significant brand recognition and scale advantages over competitors.
- Recovery Potential: After the projected earnings dip in 2025, analysts expect a return to strong growth, with a compound annual growth rate of approximately 27% from 2025 to 2027.
View European Wax Center’s full analyst estimates. (It’s free) >>>
Valuation Multiple
European Wax Center’s historical valuation multiple shows a clear downward trend. European Wax Center stock has averaged a forward P/E of 36.3x since its 2022 IPO, with peaks above 80x during its early trading days.
However, it currently trades at just 10.6x forward earnings, which is significantly below its average.
This compressed multiple reflects market concerns about the upcoming earnings dip in 2025, but may not fully account for the expected recovery in 2026-2027.
For our valuation, we’ll use a conservative 13x forward P/E multiple, which is higher than the current depressed level but still well below the historical average.
Fair Value of EWCZ Stock
Using our 2-Minute Valuation Model and applying a conservative approach:
- Conservative 2027 EPS estimate: $0.49
- Conservative forward P/E multiple: 13x
Expected Normalized EPS ($0.49) * Forward P/E ratio (13x) = Expected Share Price ($6.37)
The 2-year expected European Wax Center stock price we would get from this valuation is $6.37 per share.
With EWCZ stock currently trading at around $3.22, this implies a potential upside of approximately 98% over the next two years, or an annualized return of about 41%.
What is European Wax Center’s Price Target?
Analysts have an average price target of around $6.31 per share for EWCZ stock, indicating they see a nearly 96% upside for the stock from its current levels.
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Risks to Consider
- As a beauty service provider, European Wax Center is exposed to discretionary consumer spending, which may be constrained in a challenging economic environment.
- The significant projected earnings drop in 2025 (-44.6%) could create additional selling pressure if the decline is worse than expected.
- The company’s growth depends on franchisees’ ability to successfully operate locations and expand, which may be challenged in a difficult economic climate.
- While European Wax Center is a market leader, the beauty services industry remains highly competitive with relatively low barriers to entry.
TIKR Takeaway
European Wax Center appears significantly undervalued at today’s prices if you’re willing to look beyond the expected dip in 2025 earnings.
Trading at just 10.6x forward earnings compared to its historical average of 36.3x, the stock seems to be pricing in the worst-case scenario without accounting for the projected recovery.
With analysts projecting 96% upside and our conservative model suggesting similar returns over two years, European Wax Center could be an interesting opportunity for investors with a medium to long-term investment horizon who can tolerate some volatility.
Is European Wax Center stock a buy over the next 24 months? Use TIKR to check the stock’s analyst price targets and growth forecasts to see if the stock is undervalued today.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
