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Discussing HanesBrands’ Valuations and Earnings Potential

Sonya Bells - Author
By

Dec. 4 2020, Updated 10:52 a.m. ET

Valuations

HanesBrands (HBI) is currently trading at a one-year forward PE multiple of 12.2x. While this valuation is toward the upper end of its 52-week PE range of 9.3x–12.6x, it’s very much in line with its three-year average of 12.6x.

The company is, however, trading at a discount to apparel players PVH Corp (PVH), VF Corporation (VFC), Michael Kors (KORS), and Ralph Lauren (RL), which are currently valued at PEs of 16x, 25x, 14x, and 21x, respectively. HBI is also trading at a discount to the broader S&P 500 Index, which is valued at 17 times its next 12 months’ worth of earnings.

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One-year forward earnings expectations

While we understand that HBI is trading at a discount to its peers, it’s good to see how the company is placed in terms of its near-term earnings potential. HanesBrands’ EPS are expected to fall over 6% in the next 12 months owing to a cautious US wholesale landscape in 2018, rising input costs, and increased marketing investments.

In comparison, PVH Corp, VF Corporation, and Ralph Lauren have better earnings potentials. Their EPS are expected to rise 9%, 18%, and 5%, respectively, over the next 12 months.

Dividends

Another factor to consider before investing in any company is its dividends. HBI pays dividends regularly and has done so for the last 22 consecutive quarters. On July 24, HBI announced a dividend of $0.16, reflecting 3% YoY growth. The apparel seller has returned ~$830 million in dividends to its stockholders since April 2013.

HBI stock offers a dividend yield of 2.8%, better than the yields offered by apparel players PVH Corp (1.3%), Ralph Lauren (1.8%), and VF Corporation (2.1%) but lower than that of Gap (3.2%).

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