Warby Parker Inc. (WRBY) stock intrinsic value fair value estimate & owner earnings analysis

Business. Warby Parker sells eyeglasses, sunglasses, contact lenses and eye care through its website and app and through 323 retail stores (318 in the United States and 5 in Canada) as of December 31, 2025; 285 of those stores offer in-person eye exams. Revenue has grown every year, from $393.7 million in 2020 to $871.9 million in 2025 (about 13% in 2025). How we measure earnings. We count what the business generates for shareholders after paying for staying in business: operating cash flow, less the cash effect of changes in working capital, less stock-based compensation (a real cost paid in shares), less the portion of capital spending needed to maintain the store base and systems rather than expand them. Capital spending is mostly new store build-out and capitalized software, and we treated the share of it tied to revenue growth (about 8% of each added revenue dollar, the company's six-year average spending rate) as growth spending. On this basis owner earnings per share were about -$1.05 (2020), -$2.12 (2021, which included $28.3 million of direct-listing costs), -$1.12 (2022), -$0.54 (2023), -$0.20 (2024) and roughly zero (-$0.003, or about -$0.3 million in total) in 2025. Why the answer is close to zero. Operating cash flow looks healthy ($110.8 million in 2025, up from $98.7 million in 2024 and $61.0 million in 2023), but $34.5 million of it came from adding back stock compensation, $17.6 million came from working-capital inflows, and about $59 million had to be reinvested just to maintain stores and systems. Those three items absorb essentially all of it. Owner earnings improved by about $23 million in 2025 (from about -$23.6 million to about -$0.3 million), helped by lower stock compensation ($70.5 million in 2023, $47.3 million in 2024, $34.5 million in 2025). The year 2025 is the current level, not the average of the loss-making years, because the business has changed in size and cost structure since listing. Base case: $0 per share. We start from the 2025 level of roughly break-even and assume year-one growth of zero, which is at or below the improvement actually achieved last year. We give no credit for further margin gains, since nothing in the filings locks them in, and no credit for new stores, because growth on a near-zero earnings base adds essentially nothing and future store economics are not disclosed in a form we can rely on. The business is worth $0 on this measure, meaning that on what has actually been earned after stock compensation, we cannot point to owner earnings to discount. Consistent with our method we do not add the company's $286.4 million of cash to any case value; the analysis values the stream of owner earnings only. The company has no borrowings outstanding on its $120 million revolving credit facility (other than letters of credit used in place of cash lease deposits), so there is no debt to subtract. Bear case: $0 per share. If owner earnings slip back toward the 2024 level (about -$24 million a year) as stock compensation or working-capital tailwinds fail to repeat, the business earns nothing for shareholders. A company with no debt cannot be worth less than zero to its shareholders, so we floor the case there. Bull case: about $1.80 per share. Here the recent improvement continues in part: owner earnings step up to about $15 million in 2026 (well under the $23 million gain of 2025), then grow 8% a year for ten years (below the 12% to 15% annual revenue growth of 2023 to 2025), and afterwards fade to zero over a further ten years as we cannot name what would sustain earnings beyond that. This is a discounted value at 6% of roughly $228 million, or about $1.80 on 125.1 million diluted shares. We regard this as the upper end of what the record supports, since it depends on the business's own cost trends continuing. What could prove this estimate wrong. The upside risk to our view is that stock compensation and other costs keep falling and store-level cash generation keeps rising, in which case owner earnings would move positive faster than we assume. Also, our treatment of lease-related and other working-capital inflows as timing effects (removed from owner earnings) is a judgement; those inflows were large in 2024 and 2025 and may be more recurring than we assume. On the downside, owner earnings are only break-even even after a year of 13% revenue growth, so a slowdown would likely push them negative again. Margin-of-safety price. The margin-of-safety price of about $0.75 applies only if owner earnings after stock compensation and maintenance spending turn clearly positive and stay there (roughly $15 million a year or more). Without that, our measured value is $0.