Shares of children's apparel manufacturer Carter's (CRI, Financial) fell 7.5% today. This decline follows the company's release of disappointing third-quarter earnings, where the earnings per share (EPS) forecast for the next quarter missed Wall Street's estimates. Although revenue met expectations, it wasn't enough to alleviate investor concerns. Carter's management pointed to inflation and higher interest rates as adverse factors affecting families with young children, reducing demand for its brands.
As of now, Carter's stock is priced at USD 60.76. The company's market capitalization stands at approximately USD 2.20 billion. Despite the recent drop, the stock is considered "Modestly Undervalued" according to its GF Value of USD 71.50, implying a potential upside.
Carter’s (CRI, Financial) current price-to-earnings (P/E) ratio is 9.38, which is below the industry median, indicating that the stock may be undervalued relative to its earnings. The price-to-book (P/B) ratio is 2.71, suggesting a reasonable valuation compared to the company's book value. Furthermore, the company's yield stands at 5.19%, which is appealing to income-focused investors.
Financially, Carter's exhibits strength with a high Altman Z-Score of 3.41, indicating a low risk of bankruptcy. The company's Piotroski F-Score is 8, suggesting a healthy financial position. Additionally, Carter's operating margin is expanding, which is a positive sign of profitability.
However, growth concerns remain. Over the past year, revenue growth has slowed down by 1.2%, reflecting the challenges posed by inflation and interest rates. The company's forward price-to-earnings ratio is higher than its trailing P/E ratio, which may suggest caution from the market regarding future earnings.
Carter's (CRI, Financial) competitive landscape in the Retail - Cyclical sector includes companies such as Gap (GAP) and American Eagle Outfitters (AEO). Despite current challenges, Carter's diversified sales channels, including retail stores, eCommerce, and wholesale, provide a solid foundation for future growth once economic conditions stabilize.
