WINA Stock: A 62%-Margin Compounder — But Is It Too Expensive?

Winmark Corporation (WINA) Q2 2026 — Winmark (WINA) — the franchisor behind resale chains Plato's Closet, Once Upon a Child, Play It Again Sports and Style Encore — reported fiscal Q2 2026 revenue up ~7.6% to $22.0M at a ~62% operating margin, with EPS ~$2.81 (roughly flat YoY and a touch light of a thin estimate). The stock rose anyway. It's an asset-light, counter-cyclical royalty machine that returns essentially all its cash (book equity is negative by design). At ~$398 (~25% off its $527 high, ~35x TTM EPS), our DCF work lands below the price. How does a company earn a 62% operating margin selling other people's used clothes? Winmark isn't the store — it's the franchisor, collecting a royalty on everything its resale franchisees sell. Almost no capital, almost no inventory, and demand that actually rises in a downturn (more people buy and sell secondhand). It's one of the highest-quality little compounders around, and it has returned so much cash via buybacks and special dividends that its book equity is negative by design. Q2 revenue grew ~7.6% to $22M; EPS ~$2.81 was flat YoY and light of a thin estimate, but the market shrugged and the stock rose. The catch is price: at ~$398 (~35x earnings, 25% off its $527 high), every cut of our discounted-cash-flow model lands below the price — base case ~$273, quality-adjusted ~$365. Our call: HOLD, 3/5. A wonderful business we'd love to own cheaper. Not financial advice. THE CALL: HOLD (3/5, A WONDERFUL BUSINESS AT A DEMANDING PRICE) — base-case value ~$365 vs ~$398 today. What to watch: a pullback toward the 52-week low near $340 (where price meets the cash flows), EPS growth reaccelerating into the high single digits, and continued royalty/franchise growth with the relentless buyback shrinking the float Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.