Soho House & Co: A Strong Year of Growth and Undervaluation Ahead
ByAinvest
Wednesday, Sep 24, 2025 7:25 am ET1min read
SHCO--
Growth and Valuation
Soho House reported revenues of $333.4 million in Q3 2025, up 13.6% year-on-year, and delivered its highest quarterly Total revenues and Adjusted EBITDA. The company's membership model has shown strength, with membership revenues growing 17% year-on-year [2]. However, the stock's valuation multiple of 9.7× forward EV-to-EBITDA suggests caution. The company's strong growth in operating cash generation is projected to reach $556.6 million by 2035, with a fair value of $15.51 per share, indicating a 43.0% discount to the current share price [1].
Debt and Cash Flow Concerns
Soho House's debt levels are a significant concern. The company's $853.4 million of debt exceeds its $146.6 million of cash on the balance sheet. Its 5× net-debt-to-EBITDA ratio indicates overleveraging. Over the last two years, Soho House's reinvestments have drained resources, with an average free cash flow margin of negative 2%, meaning it burned $2.01 of cash for every $100 in revenue [1]. This cash burn raises concerns about the company's ability to return capital to investors and maintain profitability.
Conclusion
Soho House & Co's impressive growth in membership and revenues is evident, but its high debt levels and cash burn raise significant concerns. While the company's valuation appears undervalued, investors should approach SHCO with caution. The stock's strong performance may be a result of short-term factors rather than long-term growth potential. Investors should closely monitor Soho House's ability to improve its balance sheet and maintain profitability before considering a long-term investment.
References
[1] https://finance.yahoo.com/news/3-reasons-sell-shco-1-040232824.html
[2] https://www.tradingview.com/news/stockstory:29187f3a3094b:0-reflecting-on-travel-and-vacation-providers-stocks-q3-earnings-soho-house-nyse-shco/
Soho House & Co's stock has rallied 71.5% over the past year and nearly 80% since its debut. The company scores a 4 out of 6 on our value scale, indicating it is undervalued in four out of six ways we measure. The Discounted Cash Flow (DCF) model projects strong growth in operating cash generation, with estimated Free Cash Flow reaching $556.6 Million by 2035. The model arrives at a fair value of $15.51 per share, implying a 43.0% discount to the current share price.
Soho House & Co's (SHCO) stock has been a standout performer, rallying 71.5% over the past year and nearly 80% since its debut. The company scores a 4 out of 6 on our value scale, indicating it is undervalued in four out of six ways we measure. Despite this, several factors warrant caution.Growth and Valuation
Soho House reported revenues of $333.4 million in Q3 2025, up 13.6% year-on-year, and delivered its highest quarterly Total revenues and Adjusted EBITDA. The company's membership model has shown strength, with membership revenues growing 17% year-on-year [2]. However, the stock's valuation multiple of 9.7× forward EV-to-EBITDA suggests caution. The company's strong growth in operating cash generation is projected to reach $556.6 million by 2035, with a fair value of $15.51 per share, indicating a 43.0% discount to the current share price [1].
Debt and Cash Flow Concerns
Soho House's debt levels are a significant concern. The company's $853.4 million of debt exceeds its $146.6 million of cash on the balance sheet. Its 5× net-debt-to-EBITDA ratio indicates overleveraging. Over the last two years, Soho House's reinvestments have drained resources, with an average free cash flow margin of negative 2%, meaning it burned $2.01 of cash for every $100 in revenue [1]. This cash burn raises concerns about the company's ability to return capital to investors and maintain profitability.
Conclusion
Soho House & Co's impressive growth in membership and revenues is evident, but its high debt levels and cash burn raise significant concerns. While the company's valuation appears undervalued, investors should approach SHCO with caution. The stock's strong performance may be a result of short-term factors rather than long-term growth potential. Investors should closely monitor Soho House's ability to improve its balance sheet and maintain profitability before considering a long-term investment.
References
[1] https://finance.yahoo.com/news/3-reasons-sell-shco-1-040232824.html
[2] https://www.tradingview.com/news/stockstory:29187f3a3094b:0-reflecting-on-travel-and-vacation-providers-stocks-q3-earnings-soho-house-nyse-shco/
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