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How Guess Stock Reacted to Fiscal 4Q18 Results

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Guess stock soars while other apparel retailers have a bad day

As discussed in the previous section, Guess (GES) surged 28% on March 22, 2018, after reporting strong fourth-quarter earnings and issuing upbeat guidance. The results were able to stop the slide in Guess stock, which jumped to YTD (year-to-date) gains of 18% as compared to a loss of 8% before the results. The company also hit its 52-day high price of $20.21 during the day’s trade on March 22.

Meanwhile, most other apparel stocks were in the red during the day. VF (VFC), Gap (GPS), Skechers (SKX), and Tapestry (TPR) fell 3%, 2.9%, 2.9%, and 1.9%, respectively, probably driven by fears of a trade war. The S&P 500 Index was down 2.5% during the day.

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A look at Guess’s valuations

Guess is currently trading at a one-year forward price-to-earnings ratio of 11.8x versus a three-year average of 23x. Not only is the company cheaper historically, but it also trades at a discount to peers. In comparison, PVH (PVH), Ralph Lauren (RL), Tapestry (TPR), and VF Corp (VFC) trade at 16x, 17x, 19x, and 21x, respectively.

Guess’s valuations become even more attractive when we compare its earnings potential to other apparel players. Its earnings per share are expected to increase ~24% over the next 12 months (or NTM). In comparison, PVH, Tapestry, and Ralph Lauren are likely to witness a 13.5%, 13.4%, and 3.8% jump in NTM EPS.

Ratings and recommendations

Five Wall Street analysts cover Guess and have given the stock a 2.6 on a scale where one is a “strong buy” and five is a “strong sell.” Two analysts recommend buying the stock, while the remaining three suggest holding it. There are no sell recommendations on the stock.

Investors looking for exposure to Guess through ETFs can choose to invest in the Super Dividend U.S. ETF (DIV). GES accounts for approximately 1.8% in DIV.

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