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Understanding Guess’s Stock Price Movement and Valuation

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How has Guess done so far this year?

As we discussed in the corresponding part of this series, Guess (GES) was upgraded by B. Riley on Monday, February 26. Following the upgrade, the company’s share price surged by more than 7% during the day’s trading and closed at $15.87, which was 5.6% above the previous day’s closing price.

So far this year, Guess has had a challenging run in the stock market. The apparel and accessory retailer plunged 18% on February 1, after model and actress Kate Upton accused the company’s co-founder Paul Marciano of sexual harassment. Marciano has given up his duties while the company investigates the allegations.

Guess’s stock is currently sitting at YTD (year-to-date) losses of 6%.

A look at Guess’ valuations

As discussed in the preceding part of this series, the key drivers behind B. Riley’s upgrade were Guess’s low valuations and a solid earnings potential. We’ll discuss these two parameters below.

Guess is currently trading at a one-year forward PE (price-to-earnings) ratio of 21x. The company has traded cheaper historically. It has a three-year forward average PE of 23x and is operating close to the lower end of its 52-week PE range of 20x–35x.

However, Guess continues to be more expensive than other apparel and accessory companies. PVH Corp (PVH), Tapestry (TPR), and Ralph Lauren (RL), for instance, are trading at 17.4x, 18.5x, and 17.8x, respectively.

But when we look at the near-term earnings potential, Guess emerges as the most promising apparel player. Its EPS (earnings per share) are expected to increase a solid 56.5% over the next 12 months. By comparison, PVH Corp, Tapestry, and Ralph Lauren are likely to witness rises of 13.1%, 12.9%, and 2.3%, respectively, in EPS over the next 12 months.

Ratings and recommendations

Guess, which is covered by five Wall Street analysts, has a rating of 2.6 on a scale of 1.0 (“strong buy”) to 5.0 (“strong sell”). Two analysts recommend a “buy” for the stock, while the remaining three suggest a “hold.” There are currently no “sell” recommendations for the company.

Notably, investors looking to invest in Guess through ETFs can choose to the SPDR S&P Retail ETF (XRT). GES has a weight of approximately 1% in XRT.

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