Gildan Activewear Inc (GIL, Financial) has experienced a notable daily loss of 10.79%, despite a three-month gain of 15.68%. With an Earnings Per Share (EPS) of $2.61, investors are keen to understand whether the stock is modestly undervalued. This article delves into a valuation analysis to explore Gildan Activewear's market position and potential for future growth. Continue reading to gain insights into the intrinsic value of Gildan Activewear and what it means for investors.
Company Introduction
Gildan Activewear Inc (GIL, Financial) is a leading designer and manufacturer of basic apparel, with its primary market focused on wholesale blank T-shirts, sweatshirts, and other printwear. Gildan also offers a range of branded clothing through retail and direct-to-consumer channels, with brands such as Gildan, American Apparel, Comfort Colors, and Gold Toe. The company is known for its vertical integration and operates most of its manufacturing in Latin America, with a recent expansion into Bangladesh. Founded in 1984 and headquartered in Montreal, Gildan Activewear generates nearly 90% of its sales in the U.S. The company's stock price is currently $32.58, with a market cap of $5.60 billion, drawing attention to its valuation against the GF Value of $37.05.
Summarize GF Value
The GF Value is a unique measure that reflects the intrinsic value of a stock, taking into account historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line is a visual representation of this fair value, guiding investors on where the stock price should ideally be. If a stock trades significantly above this line, it may be overvalued, whereas trading below suggests it could be undervalued and potentially offer higher future returns.
Currently, Gildan Activewear (GIL, Financial) presents signs of being modestly undervalued. With a price of $32.58 per share and a market cap of $5.60 billion, the stock's valuation is attractive compared to the GF Value. This discrepancy suggests that Gildan Activewear's stock could provide a higher long-term return than its business growth alone would indicate.
Link: Discover companies that may deliver higher future returns at reduced risk.
Financial Strength
Assessing the financial strength of a company is crucial to avoid the risk of permanent capital loss. Gildan Activewear's cash-to-debt ratio of 0.09 ranks lower than 76.48% of its peers in the Manufacturing - Apparel & Accessories industry, indicating a need for caution. However, the company's overall financial strength score is 7 out of 10, signifying a fair position in terms of financial stability.
Profitability and Growth
Investing in profitable companies with a history of consistent performance is generally less risky. Gildan Activewear has shown profitability for 9 out of the past 10 years, with recent revenues of $3.10 billion and an impressive operating margin of 18.03%, outperforming 91.83% of its industry peers. The company's profitability is rated as fair by GuruFocus.
Growth is a pivotal factor in a company's valuation. Gildan Activewear's 3-year average annual revenue growth rate is 9.6%, which is commendable within its industry. Additionally, its EBITDA growth rate of 23.5% is also notable, suggesting a strong potential for value creation for shareholders.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) can further reveal its profitability. With a ROIC of 17.96% against a WACC of 10.04%, Gildan Activewear is effectively creating value for its shareholders, as it earns more on its investments than the cost of its capital.
Conclusion
In summary, Gildan Activewear (GIL, Financial) appears to be modestly undervalued. The company maintains a fair financial condition and profitability, with growth rates that are impressive within the Manufacturing - Apparel & Accessories industry. For a deeper understanding of Gildan Activewear's financial health, investors are encouraged to review its 30-Year Financials.
For investors seeking high-quality companies that may deliver above-average returns, consider exploring the GuruFocus High Quality Low Capex Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
