Is Stitch Fix (SFIX) Poised for a Turnaround as It Returns to Year-Over-Year Revenue Growth?

The question of whether Stitch Fix (SFIX) can sustain a meaningful turnaround has long occupied investors, given the company's history of volatile performance and its recent efforts to stabilize operations. With the release of its Q3 2025 financial results, the data offers a nuanced picture: modest revenue growth, improved efficiency metrics, and a return to positive Adjusted EBITDA, yet persistent challenges in client retention and profitability. For value investors and earnings momentum analysts, the key lies in dissecting these numbers through the lens of valuation metrics and operational trends.

A Modest Revenue Recovery, but Client Base Shrinks

Stitch Fix reported net revenue of $325.0 million for Q3 2025, reflecting a 0.7% year-over-year increase. This marks the first positive revenue growth in recent quarters, albeit a narrow one. However, the company's active client count fell to 2.35 million as of May 3, 2025, a 10.6% decline year-over-year and a 0.8% drop quarter-over-quarter. This suggests that the revenue growth is being driven not by expansion of the customer base but by higher spending per client.

The net revenue per active client (RPAC) rose 3.2% year-over-year to $542, a critical metric for assessing pricing power and client engagement. This improvement indicates that Stitch Fix is managing to extract more value from its existing customers, potentially through upselling or enhanced personalization. Yet, the shrinking client base raises concerns about the scalability of this strategy. If the company cannot reverse the attrition trend, even robust RPAC growth may fail to translate into meaningful top-line acceleration.

Earnings Momentum: A Mixed Bag

While Stitch Fix posted a net loss of $7.4 million for the quarter (a net loss margin of 2.3%), its Adjusted EBITDA reached $11.0 million with a margin of 3.4%. This divergence highlights the importance of non-GAAP metrics in evaluating the company's operational health. The positive Adjusted EBITDA suggests that Stitch Fix is making progress in controlling costs and improving margins, particularly after years of operating losses.

Looking at historical EBITDA margins, the company's performance has been erratic. In 2023, EBITDA margins hit a low of -12.75%, but by Q3 2025, the margin had stabilized at 3.9%. This turnaround reflects disciplined cost management and a gross margin of 44.4%, which underscores improved efficiency in its supply chain and logistics. For earnings momentum analysts, this trajectory is encouraging, though the path to consistent profitability remains uncertain.

Valuation Metrics: Undervalued or Overlooked?

From a value investment perspective, Stitch Fix's valuation appears compelling. The company's enterprise value-to-EBITDA (EV/EBITDA) ratio stands at 11.48, placing it in the "fairly valued" range relative to historical benchmarks. Meanwhile, its price-to-sales (P/S) ratio of 0.43 is significantly lower than the industry average of 17.02, suggesting it trades at a discount to peers. This discrepancy could reflect market skepticism about its revenue growth prospects, as the company's five-year revenue growth rate is negative at -2.60%.

The forward price-to-earnings (P/E) ratio of -17.94 further complicates the valuation picture. Negative earnings expectations make traditional P/E analysis less useful, but the company's strong cash position-$242.1 million in cash with no debt- provides a buffer against near-term risks. For value investors, this liquidity could be a key factor in assessing downside protection.

The Road Ahead: Can Stitch Fix Sustain Its Turnaround?

Stitch Fix's fourth-quarter guidance-projecting $298 million to $303 million in revenue and $3 million to $7 million in Adjusted EBITDA- suggests management is optimistic about maintaining momentum. However, the absence of a clear strategy to reverse client attrition remains a red flag. The company's ability to innovate in its personalization algorithms, expand into new product categories, or leverage its data assets will be critical to long-term success.

For investors, the key question is whether the current valuation reflects a realistic assessment of these risks. While Stitch Fix's EV/EBITDA and P/S ratios suggest it is undervalued relative to peers, the lack of consistent revenue growth and the fragility of its client base could limit upside potential. A disciplined approach-monitoring quarterly client trends, RPAC evolution, and EBITDA stability-will be essential for those considering a position in SFIX.

Conclusion

Stitch Fix's Q3 2025 results offer a glimmer of hope: a return to revenue growth, improved margins, and a positive Adjusted EBITDA. Yet, the company's declining client base and negative earnings expectations temper enthusiasm. For value investors, the stock's low P/S ratio and strong liquidity present a speculative opportunity, but earnings momentum analysts must remain cautious until client retention and top-line growth accelerate meaningfully. As Stitch Fix navigates its turnaround, the next few quarters will be pivotal in determining whether this is a sustainable recovery or a temporary reprieve.