Temple & Webster Group Ltd (ASX: TPW) shares have been among the biggest fallers on the ASX 300 this year.
At the time of writing, the online furniture retailer is trading at $5.77, down 67% since this time last year.
That kind of decline usually tells you one thing. Expectations were high, and reality did not quite keep up.
But don't think the story is broken. I think it has simply reset.
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A large market with a long runway
What stands out to me is how early the ASX 300 share still is in its growth journey.
Temple & Webster is operating in an addressable market of more than $40 billion across furniture, homewares, and home improvement.
Despite that, its Australian furniture and homewares market share is still only around 2.9% based on a recent investor presentation.
That is a small slice of a very large pie. It suggests that most of the opportunity still sits ahead, not behind.
There is also a structural tailwind here. Online penetration in this category is still relatively low compared to markets like the US and UK, which implies there is a long runway as more spending shifts online over time.
Growth is still happening
Another thing I think is getting overlooked is that the business is still growing.
Revenue increased 20% in the first half, with momentum continuing into the second half of the year.
Customer numbers are rising, repeat orders now make up a larger share of sales, and new growth areas like home improvement and trade are expanding quickly.
To me, that does not look like a business in decline. It looks like one that is still scaling, just without the same market enthusiasm it once had.
Valuation has come back to earth
At $5.77, the valuation is no longer stretched in the same way it used to be.
According to CommSec consensus estimates, Temple & Webster is expected to generate earnings per share of 8.2 cents in FY26, 12.2 cents in FY27, and 18 cents in FY28.
That places the ASX 300 share on roughly 32x FY28 earnings.
I would not call that cheap in absolute terms. But I also do not think it needs to be.
This is still a business with the potential to grow into a much larger company over time. If it can continue taking market share and scale its margins, that multiple could look more reasonable in hindsight.
The model is built for scale
One of the things I like about Temple & Webster is its business model.
It is asset-light, which means it does not need to invest heavily in physical stores or large inventories to grow.
Instead, it relies on a drop-shipping model and a large supplier network, which allows it to expand its range and scale efficiently.
As the business grows, there is also the potential for margins to improve. Management has outlined a long-term goal of significantly higher EBITDA margins as scale builds and costs are leveraged.
That combination of growth and margin expansion is what drives long-term returns.
So, is it a bargain?
I do not think this is a clear-cut bargain in the traditional sense.
It is not trading on a low multiple or offering a margin of safety based on current earnings.
But I do think it is more interesting than it was a year ago.
The share price has come down sharply, expectations have reset, and the long-term growth opportunity still appears to be intact.
Foolish takeaway
Temple & Webster is still a growth story.
The difference now is that you are paying a much lower price to be part of it.
If the ASX 300 share can keep growing, continue taking market share, and move toward its longer-term margin targets, then today's valuation could turn out to be reasonable.
It will not happen overnight, but for patient investors, this could be one to watch closely.
