Key Points
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Winmark’s royalty engine is healthy, with second-quarter royalties up 7.8% to $20.1 million and a 98% franchisee renewal rate locking in recurring revenue.
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A trailing P/E near 35 on a business growing mid-single digits seems to be the core problem, and it might explain why the stock has stalled since 2023.
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In five years, it seems reasonable to expect some multiple compression offsetting earnings growth, so long-term investors might want to pay attention to the growing dividend.
- 10 stocks we like better than Winmark ›
A shopper walks into a Plato’s Closet with a bag of denim and walks out with cash. The store owner then puts those clothes on a rack, turning inventory over before the mall down the street even opens. That loop—the constant exchange of value—is the mechanism that powers Winmark (NASDAQ:WINA). As the franchisor behind resale staples like Plato’s Closet, Once Upon A Child, and Play It Again Sports, it effectively acts as a landlord of the circular economy. The stock trades around $388.10 as of July 17, 2026, and has risen 3% over the past year.
Our proprietary Hidden Gems scoring system assigns Winmark an overall Superscore of 78 out of 100, placing it in the Strong category. The Superscore is an AI-powered score that evaluates a company’s overall strength by combining financial performance, product market position, technological capabilities, leadership quality, and relative valuation. It represents the unification of all our scores into a single score for public companies, with five rating bands: Exceptional (90-100), Strong (75-89), Above Average (60-74), Average (40-59), and Cautious (0-39).
Why WINA Has a 78 Superscore
- Strategic simplification: Management finished the multi-year wind-down of its capital-intensive equipment leasing business in 2025, leaving a pure-play franchisor that generates high-margin royalty streams.
- Durable competitive moat: Franchisees rely on the company’s proprietary Data Recycling System POS for inventory management, creating significant switching costs that keep the network locked in.
- High capital efficiency: With roughly 90% of revenue derived from recurring royalty fees, the company operates an asset-light business that generates robust free cash flow without requiring massive reinvestment in physical storefronts.
- Stellar franchisee retention: The system maintains a 98% annual renewal rate across its franchise operations, which secures a steady income stream and validates the ongoing value that the corporate office provides to its store owners.
Why Is WINA’s Superscore Not Higher?
- Premium market valuation: The stock currently trades at a trailing P/E of about 35, a multiple that implies high growth expectations.
- Mature growth profile: Revenue has expanded at a low-to-mid single-digit CAGR in recent years, reflecting a business that is effectively saturated within its existing retail niches.
- Operational cost pressure: SG&A expenses rose 14% year-over-year in 2025 due to an increase in compensation-related expenses and a non-recurring expense related to third-party software licenses for franchisees, the company said.
Hidden Gems Database Scores at a Glance
ScoreScore (out of 100)Supporting Data PointProduct (1Y)76Royalty growth of 6% reflects steady optimization after the company exited its leasing business.Product (5Y)79The company maintained a 98% franchise renewal rate and gross margins consistently exceeding 96%.Financial (1Y)85Operating cash flow increased 7% in 2025 to $45 million, supporting robust liquidity.Financial (5Y)77Return on assets consistently exceeded 125% throughout the 2021-2025 period.Leaders87Management adheres to a disciplined, transparent compensation structure without complex derivatives or golden parachutes.AI21The company lacks proprietary data assets for an agentic economy, relying on physical retail logistics rather than AI-driven insights.Valuation Risk57The stock trades at a trailing P/E of 35, which appears expensive given the company’s mature, low-growth profile.
Who Should Buy WINA Stock Now?
You should consider investing if…
- You are seeking exposure to consumer discretionary stocks with a proven, capital-light model.
- You value companies that generate consistent, high-margin royalty income and return significant capital to shareholders through dividends.
You may want to avoid this stock if…
- You are looking for rapid top-line growth or hyper-growth opportunities.
- You are uncomfortable with a high valuation multiple that leaves little room for earnings misses.
This Superscore provides a data-driven baseline, but you should reconcile these findings with your own financial goals and tolerance for market volatility before making an investment decision.
My 5-year prediction for WINA stock
Winmark’s next five years might look a lot like its last three. Though the business has been largely consistent, revenue growth has been hit or miss, and it seems there might be broader unease about the stock’s lofty multiple in light of recent performance: Just last week, the firm reported that second-quarter royalties rose 7.8% to $20.1 million, and first-half revenue crept up to $42.8 million from $42.3 million, respectable numbers for a franchisor with 1,383 stores and a 98% renewal rate, but nowhere near what a 35 times earnings multiple demands. The firm also reported that earnings per share fell year over year to $2.81 last quarter from $2.89 one year prior, adding to a performance gap that seems to be precisely why shares have gone roughly nowhere since the 2023 run-up, rising just 3% this past year.
Nevertheless, there are reasons for long-term investors to stay locked in: Royalties should compound at mid-to-high single digits, cash flow should stay heavy, and the dividend, now $1.02 quarterly, should keep climbing. Expect the stock to likely lag that progress, as the multiple slowly deflates toward something a low-growth business actually supports.
The Hidden Gems Superscore reflects The Motley Fool’s proprietary AI-driven evaluation of a company across product, financial, leadership, and valuation pillars as of the article date and may change over time. Performance figures are point-in-time. Past performance does not guarantee future results.
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Jonathan Ponciano has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Winmark. The Motley Fool has a disclosure policy.
