Company Profile: Gildan Activewear Inc.
Gildan Activewear Inc. (GIL: TSE)
After the last couple of growth company profiles (LWAY and GKOS) on the blog, I decided to profile something a bit more stable this week so I picked Gildan Activewear Inc. (Gildan) which is traded on the Toronto Stock Exchange (TSE).
· As I state many times on my site, I am not a financial advisor and have no financial accreditations whatsoever. I am applying some basic evaluation tools to this stock along with some commentary but this should only serve as a starter for your further research. The information below is only current to the day this post was written which may or may not be the same day as this post was published so please update the ratios and numbers to the current day before relying on them as they may have significantly changed (see How Do I Evaluate a Stock? (Part One) for information on where to find the ratios and numbers online). Please read my Legal Disclaimer. Also, I do not own Gildan stock and am not affiliated with them in any manner.
What is Gildan?
For all the readers that played junior or high school sports in Canada, you likely will be familiar with this company. Gildan was the manufacturer of many sports team uniforms for me as well as the many tournament and sports camp shirts that filled my drawers during junior high and high school. This logo may bring back memories for many of us:
Gildan is a Montreal based company that produces branded and unbranded activewear such as T-shirts and sweaters which are subsequently branded or imprinted by individuals or companies. It also manufactures and distributes Under Armour and New Balance brand socks. The company has approximately 42,000 employees worldwide and owns and operates manufacturing facilities in Central America and the Caribbean. It was in the news recently for its purchase of American Apparel for $88 million.
What is Gildan’s stock doing?
As at November 3, 2017, the numbers from our basic stock evaluation tools are as follows:
Share price: $36.67 CAD
The share price alone doesn’t tell us much other than how much you could afford to buy. One share would cost you $36.67 CAD.
Price to Earnings (P/E): 17.6
Recall this is the stock price divided by the earnings per share. If the P/E is high, you should expect to get some growth for having paid a bit more for the stock however, it could indicate the stock is overvalued. The industry average here according to Morningstar is 17.3 so Gildan is right on the industry average. To put this figure into perspective, the market is giving Gildan a value equal to 17.6 years of its earnings. This P/E is the lowest we have seen as compared to LWAY and GKOS. This is no surprise as Gildan is a larger, more stable company with a track record.
Dividend Yield: 1.3%
Dividend paying stocks are something many investors look to buy as they are like an interest rate on your shares. Dividend payouts are discretionary. Dividend yield represents the amount the company pays out in dividends relative to its share price. While a higher dividend yield is usually more desirable, you still need to consider the health of the underlying company before making a generalization either way. It is also noted that Gildan has raised its dividend payout each year for the past five years which is a positive sign.
Earnings per Share (EPS): $1.68
This figure will tell you a great deal about the growth of the company. It takes what the company earns and divides it by the number of shares outstanding. It is essentially the profit allocated to each share of the company. The bigger the number the better because the more the company earns, the more attractive it is to investors. EPS that is increasing every quarter shows earnings momentum and shows growth potential.
Gildan shares earn $1.68 per share and it has generally been increasing in the last five years.
Increasing revenue is a good sign that the company is growing. If you look at past revenue figures, Gildan’s Revenue has grown slightly every year but has not had a significant large increase since 2012. It’s substantial revenue has held steady though for the last few years.
Return on Equity: 18.4%
This figure tells you what sort of return the company is getting on the shareholders money. An increasing ROE is a good sign. Gildan’s ROE last year was 16.09%.
Market Capitalization: $8.2 Billion
This indicates Gildan is a large cap stock. Recall that small cap stocks usually have the most room for growth as opposed to large, established, stable large cap companies.
Net Profit Margin: 14.2%
This ratio tells us what profit is left over after the company pays its expenses for the year. The more money it keeps, the better. High net profit margins mean that a company is good at keeping profit after expenses are paid, which may mean they are adept at keeping their expenses down. It is a good idea to compare these over an industry to see what companies are good at operating and maintaining a high net profit margin.
Here, GIldan has a promising net profit margin and is keeping about 14 cents of profit for each dollar of sales.
Cash Flow per Share: -$0.39
Recall that this number is the cash flow through the business divided by the number of shares outstanding. It represents the net cash a company can produce per share and many investors consider this a better indicator of a company’s health than the more popular, earnings per share ratio. A higher value usually indicates the company is in a healthier position.
This ratio should be considered along with the EPS figure for a better picture of the company’s health as there should not be a wide discrepancy between the two figures. If there are large variances between those numbers, you may want to consider if there were large, non-recurring one-time items that account for the large variance.
Price to Sales (P/S): 2.5
This ratio compares the total market value of the company with its sales revenues. There is not a great deal of manipulation a company can do with its sales data so this can be a good indicator of how well the company is doing. Recall that a lower ratio relative to its peers in the industry can indicate a potentially good investment opportunity. Morningstar indicates the industry average is 2.4 so again, Gildan is directly on point.
Price to Book (P/B): 3.1
This compares the stock price with how much the stock would be worth if the company was liquidated or sold off. If the ratio is greater than one, you are paying more for the stock than the stock’s liquidation value. Gildan is at 3.1.
Price to Cash Flow (P/CF): 10.4
Having cash left over after expenses are paid off is crucial to remaining in business so this is a good indicator about the health of a company. Generally lower is better as it could indicate the company is obtaining large cash flows not yet reflected in the stock price. Morningstar indicates the industry average for this industry is 13.2 whereas Gildan is at 10.4.
So, there you have it…a basic evaluation of Gildan. There are tons of articles and discussions online about this stock and all stocks so they are also a good place to look at for further consideration. Gildan by all accounts looks to be a solid investment with a proven track record of success in their industry.
**Top photo by Janko Ferlic on Unsplash