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Market Might Still Lack Some Conviction On G-III Apparel Group, Ltd. (NASDAQ:GIII) Even After 41% Share Price Boost

Simply Wall St
·4 mins read

G-III Apparel Group, Ltd. (NASDAQ:GIII) shares have had a really impressive month, gaining 41% after a shaky period beforehand. But not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 39% in the last twelve months.

In spite of the firm bounce in price, given close to half the companies in the United States have price-to-earnings ratios (or "P/E's") above 19x, you may still consider G-III Apparel Group as an attractive investment with its 10.7x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

Recent times haven't been advantageous for G-III Apparel Group as its earnings have been falling quicker than most other companies. It seems that many are expecting the dismal earnings performance to persist, which has repressed the P/E. You'd much rather the company wasn't bleeding earnings if you still believe in the business. If not, then existing shareholders will probably struggle to get excited about the future direction of the share price.

View our latest analysis for G-III Apparel Group


If you'd like to see what analysts are forecasting going forward, you should check out our free report on G-III Apparel Group.

What Are Growth Metrics Telling Us About The Low P/E?

G-III Apparel Group's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 52%. Still, the latest three year period has seen an excellent 110% overall rise in EPS, in spite of its unsatisfying short-term performance. So we can start by confirming that the company has generally done a very good job of growing earnings over that time, even though it had some hiccups along the way.

Looking ahead now, EPS is anticipated to climb by 26% each year during the coming three years according to the nine analysts following the company. That's shaping up to be materially higher than the 13% each year growth forecast for the broader market.

In light of this, it's peculiar that G-III Apparel Group's P/E sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Bottom Line On G-III Apparel Group's P/E

G-III Apparel Group's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

Our examination of G-III Apparel Group's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E anywhere near as much as we would have predicted. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. At least price risks look to be very low, but investors seem to think future earnings could see a lot of volatility.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with G-III Apparel Group, and understanding these should be part of your investment process.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a P/E below 20x.

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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.