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G-III Apparel Group, Ltd. (GIII - Snapshot Report) raised its earnings outlook for the fiscal year during its quarterly report, which led to all earnings estimates being revised higher. Furthermore, this Zacks #2 Rank (Buy) apparel manufacturer and distributor has become a compelling valuation, as evidenced from its low price-to-sales (P/S) ratio of 0.53 and its price-to-book (P/B) multiple of just 1.67.

GIII has been enjoying solid demand for its brands and assortments, new business opportunities and increased penetration. Management expects to reinvigorate growth through acquisitions, such as the recent acquisition of Vilebrequin, a leading luxury resort brand.

Profit Surges, Beats Estimate

On December 5, G-III Apparel announced fiscal third-quarter earnings of $2.43 per share, surpassing the Zacks Consensus Estimate by 5.2% and increasing 12.5% from last year.

Management now projects fiscal 2013 earnings between $2.82 and $2.92 per share, up from the previous forecast of $2.74 to $2.84.

Net sales rose 6.6% year over year to $543.5 million, but fell short of the Zacks Consensus Estimate at $573 million. G-III Apparel’s gross profit jumped 17.2% to $190.2 million, whereas gross margin expanded 320 basis points to 35%.

Earnings Estimates on the Rise

The Zacks Consensus Estimate for fiscal 2013 rose 2.8% to $2.92 per share over the last 30 days, as all 6 estimates were revised upward. This guidance implies a year-over-year increase of 18.8%.

The Zacks Consensus Estimate for fiscal 2014 advanced 2.8% over the same timeframe to $3.32 per share, thanks again to upward revisions from all 6 estimates. The current estimate suggests year-over-year growth of 13.6%.

Impressive Valuation

In addition to low P/S and P/B multiples, the stock looks attractive with respect to a forward price-to-earnings (P/E) multiple of 11.97 (under the peer group average of 15.48). A P/E below 15.0, a P/S ratio less than 1.0 and a P/B ratio under 3.0 generally suggest a value stock. Volume is fairly strong, averaging roughly 177K daily. The return on investment (ROI) also looks attractive. It has a trailing 12-month ROI of 14.8%, which is better than the industry average of 13.9%.

The stock price remains below fiscal 2013 and 2014 earnings estimates, reflecting that the stock is still undervalued. Currently, the stock price is in the range of $30.00–$35.00, and has generated a solid year-to-date return of 41%, significantly higher than the S&P 500’s return of 13.3%.

G-III Apparel Group is a leading designer, manufacturer and distributor of women’s and men’s apparel in the United States. G-III Apparel offers its products to department, specialty, and mass merchant retail stores, as well as upper tier stores and catalogs primarily in the United States, Canada, Europe, and the Far East. The company, which primarily competes with Nike Inc. (NKE), has a market cap of $703.2 million.

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