Now could be the time to pounce on Nick Scali Limited (ASX: NCK) shares.
That's the view of analysts at Bell Potter, which believe the ASX 200 stock is good value despite rising by almost 60% this year.
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What is the broker saying about this ASX 200 stock?
Bell Potter is feeling positive about the furniture retailer due largely to its industry leading margins and global expansion. It believes this means the ASX 200 stock deserves its premium valuation and has decribed it as an "unmatched furniture retailer." The broker said:
NCK is one of Australia's largest furniture retailers competing within the middle to upper end of the Australian furniture market and growing its global presence via the UK entry. NCK is currently trading on ~26x FY26e P/E (BPe) which we think is justified given industry leading EBIT margins within the global peer group of high-quality retailers/vertically integrated brands in the broader category that we consider. NCK provided a strong 1H26e guidance of 7-9% revenue growth for its ANZ business, while for the overall group NPAT of $33-35m and we sit towards the mid-point of the range.
Its analysts also highlight that Nick Scali has a significant opportunity to grow its store network in the lucrative UK market. It has been busy sizing up the market and sees scope for the company to increase its store footprint threefold. It adds:
We size NCK's UK market opportunity based on the market fragmentation and the average size of close peers. We see a long-term potential of ~60 stores for the brand in the UK which is a ~3x opportunity (vs current footprint) offering the highest growth for the business.
As NCK UK revenues grow over the next 7+ years, we expect continuing earnings leverage over its cost base which should see a stronger uplift in earnings over the longer term. Early success of the Nick Scali product sees the offering appearing to be unique in the market and resonating well supported by the quality and value offered at relevant price points vs peer offerings.
Initiate with buy rating
According to the note, the broker has initiated coverage on Nick Scali's shares with a buy rating and $27.00 price target. Based on its current share price of $23.38, this implies potential upside of 15.5% for investors over the next 12 months.
In addition, Bell Potter expects a 2.7% dividend yield in FY 2026, which lifts the total potential return to offer 18%. It concludes:
We initiate coverage of Nick Scali with a Buy rating and PT of $27.00 based on a blend of P/E (23x target multiple on a FY27e basis) and DCF (WACC ~9%, TGR 3.5%) methodologies. We see steady market share in the core Nick Scali brand somewhat offsetting a less conducive macro environment, while further growth via the Plush brand over time in Australia and a larger opportunity in the UK offering sufficient growth levers to the company.
We see this backed up by the high-quality earnings model where NCK leads in its global peer group of household goods retailers, in addition to being the most attractive goods retailers within the ASX200 (on a growth adjusted basis). We see catalysts for 1H earnings driven by supportive 2Q26 comps.
