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Gildan Activewear Inc. (TSE:GIL): Will The Growth Last?

Saundra Reilly

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Gildan Activewear Inc.’s (TSE:GIL) most recent earnings update in December 2018 confirmed that the company faced a minor headwind with earnings falling from US$362m to US$351m, a change of -3.2%. Below, I’ve laid out key growth figures on how market analysts view Gildan Activewear’s earnings growth trajectory over the next few years and whether the future looks brighter. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.

Check out our latest analysis for Gildan Activewear

Analysts’ expectations for this coming year seems buoyant, with earnings expanding by a robust 19%. This growth seems to continue into the following year with rates arriving at double digit 30% compared to today’s earnings, and finally hitting US$486m by 2022.

TSX:GIL Past and Future Earnings, February 25th 2019

Even though it is informative knowing the growth year by year relative to today’s value, it may be more valuable determining the rate at which the company is moving on average every year. The pro of this approach is that it removes the impact of near term flucuations and accounts for the overarching direction of Gildan Activewear’s earnings trajectory over time, which may be more relevant for long term investors. To calculate this rate, I’ve inserted a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 11%. This means that, we can expect Gildan Activewear will grow its earnings by 11% every year for the next couple of years.

Next Steps:

For Gildan Activewear, I’ve compiled three pertinent aspects you should look at:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is GIL worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether GIL is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of GIL? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.