Interested In The Gap Inc (NYSE:GPS)? Here’s What Its Recent Track-Record Looks Like
Today I will take a look at The Gap Inc’s (NYSE:GPS) most recent earnings update (28 October 2017) and compare these latest figures against its performance over the past few years, as well as how the rest of the specialty retail industry performed. As an investor, I find it beneficial to assess GPS’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time. View our latest analysis for Gap
Did GPS’s recent EPS Growth beat the long-term trend and the industry?
I prefer to use data from the most recent 12 months, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This technique enables me to analyze different companies in a uniform manner using the latest information. Gap’s most recent twelve-month earnings is $863.0M, which, against the previous year’s level, has risen by 28.71%. Since these figures are fairly myopic, I’ve calculated an annualized five-year value for GPS’s net income, which stands at $1,027.3M. This suggests that, despite the fact that earnings increased from last year’s level, over the long run, Gap’s earnings have been waning on average.
Why is this? Let’s examine what’s going on with margins and if the rest of the industry is facing the same headwind. Revenue growth over the last couple of years, has been positive, nevertheless earnings growth has been falling. This implies that Gap has been ramping up expenses, which is harming margins and earnings, and is not a sustainable practice. Inspecting growth from a sector-level, the US specialty retail industry has been growing, albeit, at a muted single-digit rate of 8.14% over the previous year, and 5.98% over the past five years. This means any tailwind the industry is profiting from, Gap is able to leverage this to its advantage.
What does this mean?
Gap’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Recent positive growth doesn’t necessarily mean it’s onwards and upwards for the company. There may be variables that are affecting the industry as a whole, thus the high industry growth rate over the same time period. You should continue to research Gap to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for GPS’s future growth? Take a look at our free research report of analyst consensus for GPS’s outlook.
2. Financial Health: Is GPS’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
