Should You Think About Buying Gildan Activewear Inc. (TSE:GIL) Now?
Gildan Activewear Inc. (TSE:GIL), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the TSX over the last few months, increasing to CA$43.87 at one point, and dropping to the lows of CA$36.28. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Gildan Activewear's current trading price of CA$38.35 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Gildan Activewear’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for Gildan Activewear
Is Gildan Activewear Still Cheap?
The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 8.04x is currently trading slightly below its industry peers’ ratio of 10.31x, which means if you buy Gildan Activewear today, you’d be paying a decent price for it. And if you believe that Gildan Activewear should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Although, there may be an opportunity to buy in the future. This is because Gildan Activewear’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
Can we expect growth from Gildan Activewear?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a negative profit growth of -6.4% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Gildan Activewear. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? Currently, GIL appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on GIL, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on GIL for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystallize your views on GIL should the price fluctuate below the industry PE ratio.
If you'd like to know more about Gildan Activewear as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 3 warning signs with Gildan Activewear, and understanding them should be part of your investment process.
If you are no longer interested in Gildan Activewear, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
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