Why Hanesbrands is cheaper historically and trading at a discount to peers
Hanesbrands (HBI) is currently trading at a one-year forward price-to-earnings ratio of 11x, which puts it closer to the lower end of its 52-week PE range of 9.5x – 15x. It has a three-year average forward-looking PE of 15.8x.
Not only is the company cheaper historically, but it’s also trading at a discount to most branded apparel peers. PVH Corp (PVH), The Gap (GPS), VF Corp (VFC), and Ralph Lauren (RL) are currently trading at 13.3x, 12.9x, 18.3x, and 15.5x, respectively. Sportswear companies are even more expensive. Under Armour (UAA), for instance, is trading at 45x.
Strong dividend yield and good earnings potential
As we discussed in Part 6 of this series, the company has a good dividend yield, in line with what’s offered by dividend-paying branded apparel peers.
In addition, HBI has strong earnings potential. Its earnings per share (or EPS) are projected to rise 6% over the next 12 months. Only PVH Corp (PVH) has better earnings expectations. PVH Corp’s earnings per share are projected to rise 8.7% over the next 12 months. EPS for Gap and Ralph Lauren are expected to fall 2.9% and 11%, respectively, over the next year.
Wall Street is positive on the stock
As we discussed in the previous part of this series, Wall Street is positive on HBI’s stock. Hanesbrands has, in fact, received one of the best ratings in the peer group and can, therefore, be considered a good pick from the apparel sector.
Investors wanting exposure to HBI can consider pooled investment vehicles like the iShares Morningstar Mid-Cap Growth ETF (JKH), which invests 0.55% of its portfolio in HBI.