WEIS MARKETS INC (WMK) stock intrinsic value fair value estimate & owner earnings analysis

Weis Markets operates 202 supermarkets under the Weis name: 120 in Pennsylvania, 52 in Maryland, 9 in Virginia, 8 in New York, 6 in New Jersey, 4 in Delaware and 3 in West Virginia (year-end 2025). It added a store in Waldorf, Maryland in February 2026. Sales were $4.96 billion in 2025, from groceries, fresh food, pharmacy and fuel. The company has no borrowings and does not pay its staff in stock. At June 27, 2026 it held $103.5 million of cash and $104.5 million of marketable securities. The Weis family still controls it. In June 2025 the company spent $140 million buying back 2,153,846 shares (8% of the company) from two Weis family trusts, which leaves 24.74 million shares outstanding. Earnings measure. We value the cash an owner could take out of the business. That is operating cash flow with timing swings in inventories, receivables and payables removed, minus the capital spending needed to keep the store base as it is. A share of capital spending is treated as growth spending only in proportion to sales growth. On that basis owner earnings were $13.6 million in 2016 (an acquisition year, with $142 million of capital spending), then $64.7M, $71.7M, $65.7M, $114.2M (the 2020 pandemic surge), $75.4M, $118.3M, $107.2M, $45.8M and $28.9M in 2025. Over the decade capital spending ran about 30% above depreciation, so a good part of reported profit has always gone back into the stores. We start from the ten-year median of about $68.7 million, or $2.78 per current share. That median is the same whether or not 2016 and 2020 are included, and it covers a full decade of food deflation, the pandemic and the 2021-2023 inflation. We did not use the last two years as the starting level. They are low because capital spending jumped to $161 million in 2024 and $202 million in 2025 (new stores in Maryland and Delaware, remodels, distribution and technology), while depreciation was $114 million and $125 million. Restatement. In its 2025 annual report Weis disclosed that some inventory amounts had been recorded incorrectly and overstated, and it restated 2022-2024. Restated net income for 2022 is $119.7 million against $125.2 million originally reported. The auditor found a material weakness in inventory controls, and the Audit Committee hired outside counsel to investigate. Our figures use the restated numbers. Operating cash flow was not changed by the restatement. Recent trend. Owner earnings fell 37% in 2025. Filings for the first half of 2026 show a recovery that is under way but not finished. Net income was $50.7 million against $44.8 million a year earlier, operating cash flow was $95.3 million against $61.4 million, and sales rose 4.6%. Capital spending, however, was still $88.0 million, against $88.3 million in the first half of 2025. That points to owner earnings of roughly $50-55 million a year right now, and the base case starts there instead of at the long-run median. Base case (about $62 per share). Owner earnings are $55 million next year and $62 million the year after. They return to the decade median of $68.7 million in year three, as capital spending settles back toward its long-run relationship with depreciation. That is a return to a level already earned, not new growth. After that we credit 1.5% a year, below the roughly 2-3% a year at which owner earnings actually rose between 2017-2019 and 2021-2025. It comes from passing food-price inflation through to sales and from adding a few self-funded stores at a time. Sales grew in every year from 2016 to 2025, including through 2020. Past year ten we credit 1% a year. A regional grocer's sales follow food prices, and Weis has held a dense store network in central Pennsylvania for more than a century. The business is worth about $1.37 billion. With no debt, adding about $168 million of cash and securities beyond what the stores need to operate gives about $1.53 billion, or roughly $62 per share. We give no credit to market share gains, margin expansion or new markets. Bear case (about $33 per share). Capital spending stays at the 2024-2026 level of about 1.47 times depreciation and never comes back down. Rising construction costs and competition from Walmart, Aldi, Lidl, Giant (Ahold Delhaize) and Wegmans force continual remodeling, which holds owner earnings near $40 million. On top of that, the company goes through a repeat of the 2016-2018 squeeze from food deflation and new discount competition. In that period net income fell from $87 million to $63 million, about 28%. We apply it in years three to five, cutting owner earnings to $30M, $22M and $30M before they recover to $40M. Nothing grows after that. The business is worth about $643 million, and with no debt plus the $168 million of surplus cash, shareholders' value is about $811 million, or roughly $33 per share. The company's lack of debt means even this case never strains its finances. Bull case (about $86 per share). The new stores and the larger distribution network start paying off and capital spending falls back toward its historical level. Owner earnings reach $60M, $70M and $78M over three years, in line with the 25% rise in first-half 2026 operating income, then grow 3% a year, below the 4.8% a year sales grew over the past decade, and 2% after year ten. The business is worth about $1.96 billion, or about $2.13 billion and $86 per share with the surplus cash. Things that could not be fully reconciled. Receivables and prepaid expenses rose from $81 million to $139 million between 2022 and 2025, mostly receivables, which likely reflects pharmacy growth. Our earnings measure treats this as timing, but if the build-up is permanent, recent owner earnings are overstated by up to about $15-20 million a year. The full results of the inventory investigation have not been disclosed. Our previous analysis was prepared on a different basis, and its figures are not comparable with these. Margin-of-safety price. We are fairly confident in the long-run earnings level. A decade of results, through deflation, a pandemic and an inflation spike, puts it around $65-75 million. We are less sure how much of today's heavy capital spending is permanent, and the inventory restatement means some of the figures have been unreliable before. The worst plausible outcome is a long price war with discounters while spending stays high and the inventory problem proves larger than disclosed. Even then the structure holds. There is no debt, more than $200 million of liquid assets, $1.1 billion of stores and other property, and a dividend of $1.36 a share that has not been cut in the past decade. If we are wrong about capital spending normalizing and about the recovery, the shares are worth roughly the low-$30s of the bear case. The controlling family means no outside pressure will force value to be recognized quickly. The dividend is about 3.8% a year of the margin-of-safety price over the holding period. The margin-of-safety price is $36. From that price, a return toward normal earnings over about three years, plus the dividends, implies roughly 20% a year. If instead the bear case plays out, the dividend, the surplus cash and the debt-free balance sheet limit the loss to a modest one.