Gap Inc. stock (NYSE: GPS), a specialty retailer selling casual apparel, accessories, and personal care products for men, women, and children under the Gap
GPS
Notably, GPS stock had a Sharpe Ratio of 0 since early 2017, which is much lower than the figure of 0.6 for the S&P 500 Index over the same period. Compare this with the Sharpe of 1.2 for the Trefis Reinforced Value portfolio. Sharpe is a measure of return per unit of risk, and high-performance portfolios can provide the best of both worlds.
Our forecast indicates that Gap’s valuation is $10 per share, which is almost in line with the current market price. Look at our interactive dashboard analysis on Gap’s Earnings Preview: What To Expect in Q2? for more details.
(1) Revenues expected to come in line with the consensus estimates
Trefis estimates Gap’s FQ2 2023 revenues to be $3.6 Bil, matching the market expectations. In Q1, Gap’s revenue fell 6% y-0-y to $3.28 billion on a 3% drop in comparable sales. The company’s 8% comps decline at Banana Republic and a 1% drop at Old Navy more than offset a 1% rise at Gap brand. Also, its store sales decreased by 4% y-o-y and online sales fell by 9% y-o-y (and represented 37% of total sales) in Q1.
(2) EPS likely to match consensus estimates
Gap’s FQ2 2023 earnings per share is expected to come in at 9 cents per Trefis analysis, in line with the consensus estimate. The company’s net loss narrowed to $18 million, or 5 cents per share, from $162 million, or 44 cents a share, in the year-earlier period. On an adjusted basis, the company reported earnings of $3 million, or 1 cent per share in Q1 2023. The company’s adjusted operating margin grew by more than 600 basis points compared to the same time last year. This was due to a large improvement in gross margin caused by the reduction of excessive air freight costs, better advertising activity, and adjusted SG&A leverage.
(3) Stock price estimate similar to the current market price
Going by our Gap’s Valuation, with a revenue per share estimate of $41.88 and a P/S multiple of 0.3x in fiscal 2023, this translates into a price of $10, which is almost similar to the current market price.
It is helpful to see how its peers stack up. GPS Peers shows how Gap’s stock compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.
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