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The Gap, Inc. Message Board

  • analyst112 analyst112 Jan 4, 2011 10:35 AM Flag


    $2.65 billion of EBITDA. Market value $13B equals 4.9x BAIN and KKR and Blackstone can buy it at 7x up 40% from today's price. J Crew went for 8 times and GPS is more stable. Easy money.

    If it is not taken out:

    $1.7B of cash flow, $560M of capex, $260M dividends leaves enough cash flow to retire 6.6% of the outstanding shares. That means 5% growth, 2% dividend, 6.6% return from share shrink. Total return 13.6%. 25% ROE 15% ROA.

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    • Still cannot believe "investors" sell off a stock on one months sales shortfall. There are way too many hedge funds and hot money managers day trading. The fundamental story as you lay out is perfectly reasonable. GAP has become the go-to store for most clothing purchasers. SSS will vary according to style change and weather and the shareholder return with this massive cash flow will be good. Cash is king and they have it. The weather will get better! Load up.

      • 1 Reply to sage533
      • Agree that one month of SSS is nothing to get too worked up about (I doubt the stock would jump $1.50 if they were up a couple of %). But I must say that the numbers were shockingly bad and if the trend continues it's a disturbing problem. Everyone else missed their SSS numbers too but they were all up vs. last year. The 8% decline in Gap NA was astounding.

        I'm hoping it's entirely due to a lack of discounting and that margins will be extremely strong - but I'm not holding my breath.

        Either way, $1.5bn of free cash flow on about $11.5b of enterprise value with no debt is a great buy in my books.

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