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The Gap, Inc. (GPS) Hits Fresh High: Is There Still Room to Run?
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Have you been paying attention to shares of Gap (GPS - Free Report) ? Shares have been on the move with the stock up 14.9% over the past month. The stock hit a new 52-week high of $23.11 in the previous session. Gap has gained 8.6% since the start of the year compared to the 9.2% move for the Zacks Retail-Wholesale sector and the 12.5% return for the Zacks Retail - Apparel and Shoes industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on March 7, 2024, Gap reported EPS of $0.49 versus consensus estimate of $0.2 while it beat the consensus revenue estimate by 2.03%.
For the current fiscal year, Gap is expected to post earnings of $1.36 per share on $14.86 billion in revenues. This represents a -4.9% change in EPS on a -0.19% change in revenues. For the next fiscal year, the company is expected to earn $1.48 per share on $15.11 billion in revenues. This represents a year-over-year change of 8.71% and 1.7%, respectively.
Valuation Metrics
Gap may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Gap has a Value Score of A. The stock's Growth and Momentum Scores are A and A, respectively, giving the company a VGM Score of A.
In terms of its value breakdown, the stock currently trades at 16.7X current fiscal year EPS estimates, which is a premium to the peer industry average of 15.4X. On a trailing cash flow basis, the stock currently trades at 8X versus its peer group's average of 8.4X. Additionally, the stock has a PEG ratio of 1.39. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Gap currently has a Zacks Rank of #1 (Strong Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Gap passes the test. Thus, it seems as though Gap shares could still be poised for more gains ahead.
How Does GPS Stack Up to the Competition?
Shares of GPS have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Abercrombie & Fitch Company (ANF - Free Report) . ANF has a Zacks Rank of # 1 (Strong Buy) and a Value Score of B, a Growth Score of A, and a Momentum Score of A.
Earnings were strong last quarter. Abercrombie & Fitch Company beat our consensus estimate by 5.69%, and for the current fiscal year, ANF is expected to post earnings of $7.31 per share on revenue of $4.52 billion.
Shares of Abercrombie & Fitch Company have gained 3.2% over the past month, and currently trade at a forward P/E of 16.49X and a P/CF of 9.3X.
The Retail - Apparel and Shoes industry may rank in the bottom 67% of all the industries we have in our universe, but there still looks like there are some nice tailwinds for GPS and ANF, even beyond their own solid fundamental situation.
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The Gap, Inc. (GPS) Hits Fresh High: Is There Still Room to Run?
Have you been paying attention to shares of Gap (GPS - Free Report) ? Shares have been on the move with the stock up 14.9% over the past month. The stock hit a new 52-week high of $23.11 in the previous session. Gap has gained 8.6% since the start of the year compared to the 9.2% move for the Zacks Retail-Wholesale sector and the 12.5% return for the Zacks Retail - Apparel and Shoes industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on March 7, 2024, Gap reported EPS of $0.49 versus consensus estimate of $0.2 while it beat the consensus revenue estimate by 2.03%.
For the current fiscal year, Gap is expected to post earnings of $1.36 per share on $14.86 billion in revenues. This represents a -4.9% change in EPS on a -0.19% change in revenues. For the next fiscal year, the company is expected to earn $1.48 per share on $15.11 billion in revenues. This represents a year-over-year change of 8.71% and 1.7%, respectively.
Valuation Metrics
Gap may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Gap has a Value Score of A. The stock's Growth and Momentum Scores are A and A, respectively, giving the company a VGM Score of A.
In terms of its value breakdown, the stock currently trades at 16.7X current fiscal year EPS estimates, which is a premium to the peer industry average of 15.4X. On a trailing cash flow basis, the stock currently trades at 8X versus its peer group's average of 8.4X. Additionally, the stock has a PEG ratio of 1.39. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Gap currently has a Zacks Rank of #1 (Strong Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Gap passes the test. Thus, it seems as though Gap shares could still be poised for more gains ahead.
How Does GPS Stack Up to the Competition?
Shares of GPS have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Abercrombie & Fitch Company (ANF - Free Report) . ANF has a Zacks Rank of # 1 (Strong Buy) and a Value Score of B, a Growth Score of A, and a Momentum Score of A.
Earnings were strong last quarter. Abercrombie & Fitch Company beat our consensus estimate by 5.69%, and for the current fiscal year, ANF is expected to post earnings of $7.31 per share on revenue of $4.52 billion.
Shares of Abercrombie & Fitch Company have gained 3.2% over the past month, and currently trade at a forward P/E of 16.49X and a P/CF of 9.3X.
The Retail - Apparel and Shoes industry may rank in the bottom 67% of all the industries we have in our universe, but there still looks like there are some nice tailwinds for GPS and ANF, even beyond their own solid fundamental situation.