Gap has performed better than peers in the stock market
The performance of apparel stocks has been unimpressive in 2017. The S&P Apparel and Accessories Index is down 11% year-to-date (or YTD). PVH (PVH), VF Corp (VFC), Hanesbrands (HBI), and Ralph Lauren (RL) have lost 5.3%, 9.4%, 10.5%, and 16% YTD as of February 7, 2017, respectively.
Gap (GPS) is one of the few companies that has managed to stay in the green. The company has gained 1.3% to date. It’s trading 35% below its 52-week high price. Analysts are positive on the company and are expecting a price rise of ~13% over the next one-year period. The average price target by 30 analysts covering Gap is $25.59.
Wall Street recommendations
Around two-thirds of the analysts recommend holding Gap. While 10% recommend buying the stock, 23% have set a sell rating on the company. In comparison, 86% of analysts suggest buying HBI and 60% recommend buying PVH.
Gap has received a poor rating in comparison to peers from Wall Street. The company is jointly rated a 3.1 on a scale where one is a “strong buy” and five is a “strong sell.” In comparison, PVH, VF, and HBI are rated 2.3, 2.8, and 1.7, respectively.
Gap is currently trading at a one-year forward earnings multiple of 11.1x. It’s trading at a discount to PVH, VFC, and Ralph Lauren, which are currently valued at 12x, 15x, and 14.9x, respectively. HBI is, however, cheaper compared to Gap, and is trading at 9.7x.
Investors looking to invest in Gap through ETFs can choose to invest in the iShares Morningstar Mid-Cap Value ETF (JKI), which invests 0.33% of its holdings in Gap.