Intrinsic value of Gildan Activewear Inc. - GIL

Previous Close

$40.61

  Intrinsic Value

$7.92

stock screener

  Rating & Target

str. sell

-80%

Previous close

$40.61

 
Intrinsic value

$7.92

 
Up/down potential

-80%

 
Rating

str. sell

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of GIL stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2017), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 9.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -12.63
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  3,493
  3,563
  3,645
  3,738
  3,844
  3,960
  4,088
  4,227
  4,378
  4,540
  4,715
  4,901
  5,100
  5,312
  5,537
  5,776
  6,029
  6,297
  6,580
  6,879
  7,195
  7,529
  7,881
  8,251
  8,642
  9,053
  9,487
  9,943
  10,422
  10,927
  11,458
Variable operating expenses, $m
 
  3,167
  3,239
  3,322
  3,414
  3,517
  3,630
  3,752
  3,885
  4,028
  4,182
  4,319
  4,494
  4,681
  4,879
  5,089
  5,312
  5,548
  5,798
  6,062
  6,340
  6,634
  6,944
  7,271
  7,615
  7,978
  8,359
  8,761
  9,184
  9,629
  10,097
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  2,991
  3,167
  3,239
  3,322
  3,414
  3,517
  3,630
  3,752
  3,885
  4,028
  4,182
  4,319
  4,494
  4,681
  4,879
  5,089
  5,312
  5,548
  5,798
  6,062
  6,340
  6,634
  6,944
  7,271
  7,615
  7,978
  8,359
  8,761
  9,184
  9,629
  10,097
Operating income, $m
  502
  396
  406
  417
  429
  443
  458
  475
  493
  512
  533
  582
  606
  631
  658
  686
  716
  748
  782
  817
  855
  895
  936
  980
  1,027
  1,076
  1,127
  1,181
  1,238
  1,298
  1,361
EBITDA, $m
  692
  593
  607
  623
  640
  660
  681
  704
  729
  756
  785
  816
  849
  885
  922
  962
  1,004
  1,049
  1,096
  1,146
  1,198
  1,254
  1,312
  1,374
  1,439
  1,508
  1,580
  1,656
  1,736
  1,820
  1,908
Interest expense (income), $m
  14
  28
  29
  30
  31
  33
  34
  35
  37
  39
  41
  43
  45
  47
  50
  52
  55
  58
  61
  65
  68
  72
  76
  80
  84
  89
  94
  99
  104
  110
  116
Earnings before tax, $m
  475
  368
  377
  387
  398
  411
  425
  440
  456
  473
  492
  540
  561
  584
  608
  634
  661
  690
  720
  753
  787
  823
  860
  900
  942
  987
  1,033
  1,082
  1,134
  1,188
  1,245
Tax expense, $m
  7
  99
  102
  104
  107
  111
  115
  119
  123
  128
  133
  146
  151
  158
  164
  171
  178
  186
  194
  203
  212
  222
  232
  243
  254
  266
  279
  292
  306
  321
  336
Net income, $m
  468
  268
  275
  282
  291
  300
  310
  321
  333
  346
  359
  394
  409
  426
  444
  463
  483
  504
  526
  549
  574
  600
  628
  657
  688
  720
  754
  790
  828
  867
  909

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  52
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  4,040
  4,067
  4,161
  4,268
  4,388
  4,521
  4,667
  4,826
  4,998
  5,183
  5,382
  5,595
  5,822
  6,064
  6,320
  6,593
  6,882
  7,188
  7,511
  7,853
  8,214
  8,595
  8,996
  9,419
  9,865
  10,335
  10,829
  11,350
  11,898
  12,474
  13,080
Adjusted assets (=assets-cash), $m
  3,988
  4,067
  4,161
  4,268
  4,388
  4,521
  4,667
  4,826
  4,998
  5,183
  5,382
  5,595
  5,822
  6,064
  6,320
  6,593
  6,882
  7,188
  7,511
  7,853
  8,214
  8,595
  8,996
  9,419
  9,865
  10,335
  10,829
  11,350
  11,898
  12,474
  13,080
Revenue / Adjusted assets
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
  0.876
Average production assets, $m
  1,900
  1,938
  1,983
  2,034
  2,091
  2,154
  2,224
  2,300
  2,382
  2,470
  2,565
  2,666
  2,774
  2,890
  3,012
  3,142
  3,280
  3,425
  3,579
  3,742
  3,914
  4,096
  4,287
  4,489
  4,701
  4,925
  5,161
  5,409
  5,670
  5,944
  6,233
Working capital, $m
  1,492
  1,468
  1,502
  1,540
  1,584
  1,632
  1,684
  1,742
  1,804
  1,871
  1,942
  2,019
  2,101
  2,188
  2,281
  2,380
  2,484
  2,594
  2,711
  2,834
  2,965
  3,102
  3,247
  3,400
  3,561
  3,730
  3,908
  4,096
  4,294
  4,502
  4,721
Total debt, $m
  811
  835
  862
  894
  929
  969
  1,012
  1,059
  1,109
  1,164
  1,223
  1,285
  1,352
  1,424
  1,500
  1,580
  1,665
  1,755
  1,851
  1,952
  2,058
  2,170
  2,289
  2,414
  2,545
  2,684
  2,830
  2,983
  3,145
  3,315
  3,494
Total liabilities, $m
  1,176
  1,200
  1,227
  1,259
  1,294
  1,334
  1,377
  1,424
  1,474
  1,529
  1,588
  1,650
  1,717
  1,789
  1,865
  1,945
  2,030
  2,120
  2,216
  2,317
  2,423
  2,535
  2,654
  2,779
  2,910
  3,049
  3,195
  3,348
  3,510
  3,680
  3,859
Total equity, $m
  2,864
  2,867
  2,933
  3,009
  3,093
  3,187
  3,290
  3,402
  3,523
  3,654
  3,794
  3,944
  4,104
  4,275
  4,456
  4,648
  4,852
  5,067
  5,295
  5,536
  5,791
  6,059
  6,342
  6,641
  6,955
  7,286
  7,635
  8,002
  8,388
  8,794
  9,221
Total liabilities and equity, $m
  4,040
  4,067
  4,160
  4,268
  4,387
  4,521
  4,667
  4,826
  4,997
  5,183
  5,382
  5,594
  5,821
  6,064
  6,321
  6,593
  6,882
  7,187
  7,511
  7,853
  8,214
  8,594
  8,996
  9,420
  9,865
  10,335
  10,830
  11,350
  11,898
  12,474
  13,080
Debt-to-equity ratio
  0.283
  0.290
  0.290
  0.300
  0.300
  0.300
  0.310
  0.310
  0.310
  0.320
  0.320
  0.330
  0.330
  0.330
  0.340
  0.340
  0.340
  0.350
  0.350
  0.350
  0.360
  0.360
  0.360
  0.360
  0.370
  0.370
  0.370
  0.370
  0.370
  0.380
  0.380
Adjusted equity ratio
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705
  0.705

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  468
  268
  275
  282
  291
  300
  310
  321
  333
  346
  359
  394
  409
  426
  444
  463
  483
  504
  526
  549
  574
  600
  628
  657
  688
  720
  754
  790
  828
  867
  909
Depreciation, amort., depletion, $m
  190
  197
  201
  206
  211
  216
  222
  229
  236
  244
  252
  234
  243
  253
  264
  276
  288
  300
  314
  328
  343
  359
  376
  394
  412
  432
  453
  474
  497
  521
  547
Funds from operations, $m
  771
  466
  476
  488
  501
  516
  532
  550
  569
  589
  612
  628
  653
  680
  708
  738
  770
  804
  840
  878
  918
  960
  1,004
  1,051
  1,100
  1,152
  1,207
  1,265
  1,325
  1,389
  1,456
Change in working capital, $m
  44
  29
  34
  39
  43
  48
  53
  57
  62
  67
  72
  77
  82
  87
  93
  98
  104
  110
  117
  123
  130
  137
  145
  153
  161
  170
  178
  188
  198
  208
  219
Cash from operations, $m
  727
  437
  442
  449
  458
  468
  480
  493
  507
  523
  540
  551
  571
  592
  615
  640
  666
  694
  723
  754
  787
  822
  859
  898
  939
  983
  1,028
  1,077
  1,127
  1,181
  1,237
Maintenance CAPEX, $m
  0
  -167
  -170
  -174
  -178
  -183
  -189
  -195
  -202
  -209
  -217
  -225
  -234
  -243
  -253
  -264
  -276
  -288
  -300
  -314
  -328
  -343
  -359
  -376
  -394
  -412
  -432
  -453
  -474
  -497
  -521
New CAPEX, $m
  -189
  -38
  -45
  -51
  -57
  -63
  -70
  -76
  -82
  -88
  -95
  -101
  -108
  -115
  -122
  -130
  -138
  -146
  -154
  -163
  -172
  -181
  -191
  -202
  -213
  -224
  -236
  -248
  -261
  -275
  -289
Cash from investing activities, $m
  -410
  -205
  -215
  -225
  -235
  -246
  -259
  -271
  -284
  -297
  -312
  -326
  -342
  -358
  -375
  -394
  -414
  -434
  -454
  -477
  -500
  -524
  -550
  -578
  -607
  -636
  -668
  -701
  -735
  -772
  -810
Free cash flow, $m
  317
  232
  228
  225
  222
  221
  221
  222
  223
  225
  228
  225
  229
  234
  239
  246
  253
  260
  269
  277
  287
  298
  309
  320
  333
  347
  361
  376
  392
  409
  427
Issuance/(repayment) of debt, $m
  -101
  24
  28
  32
  35
  39
  43
  47
  51
  55
  59
  63
  67
  71
  76
  80
  85
  90
  95
  101
  106
  112
  118
  125
  132
  139
  146
  154
  162
  170
  179
Issuance/(repurchase) of shares, $m
  -530
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -233
  24
  28
  32
  35
  39
  43
  47
  51
  55
  59
  63
  67
  71
  76
  80
  85
  90
  95
  101
  106
  112
  118
  125
  132
  139
  146
  154
  162
  170
  179
Total cash flow (excl. dividends), $m
  83
  256
  255
  256
  258
  261
  264
  269
  274
  280
  287
  287
  296
  305
  315
  326
  338
  350
  364
  378
  394
  410
  427
  445
  465
  485
  507
  529
  554
  579
  606
Retained Cash Flow (-), $m
  93
  -55
  -66
  -75
  -85
  -94
  -103
  -112
  -121
  -131
  -140
  -150
  -160
  -170
  -181
  -192
  -204
  -216
  -228
  -241
  -254
  -268
  -283
  -298
  -314
  -331
  -349
  -367
  -386
  -406
  -427
Prev. year cash balance distribution, $m
 
  52
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  252
  189
  181
  173
  167
  161
  157
  153
  149
  147
  137
  136
  135
  134
  134
  134
  135
  136
  137
  139
  141
  144
  147
  150
  154
  158
  163
  167
  173
  178
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  242
  173
  157
  143
  129
  117
  106
  95
  86
  77
  65
  58
  51
  45
  39
  34
  29
  25
  21
  18
  15
  12
  10
  8
  6
  5
  3
  3
  2
  1
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Gildan Activewear Inc. is a manufacturer and marketer of branded basic family apparel, including T-shirts, fleece, sport shirts, underwear, socks, hosiery and shapewear. The Company operates through two segments: Printwear and Branded Apparel. The Printwear segment designs, manufactures, sources, markets, and distributes undecorated activewear products. The Branded Apparel segment designs, manufactures, sources, markets, and distributes branded family apparel, which includes athletic, casual and dress socks, underwear, activewear, sheer hosiery, legwear, and shapewear products, which are sold to retailers in the United States and Canada. The Company sells its products under various brands, including the Gildan, Gold Toe, Anvil, Comfort Colors, American Apparel, Alstyle, Secret, Silks, Kushyfoot, Secret Silky, Therapy Plus, Peds, and MediPeds brands. The Company distributes its products in printwear markets in the United States, Canada, Mexico, Europe, Asia-Pacific and Latin America.

FINANCIAL RATIOS  of  Gildan Activewear Inc. (GIL)

Valuation Ratios
P/E Ratio 20
Price to Sales 2.7
Price to Book 3.3
Price to Tangible Book
Price to Cash Flow 12.9
Price to Free Cash Flow 17.4
Growth Rates
Sales Growth Rate -12.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -57.2%
Cap. Spend. - 3 Yr. Gr. Rate -3.5%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 28.3%
Total Debt to Equity 28.3%
Interest Coverage 35
Management Effectiveness
Return On Assets 12.2%
Ret/ On Assets - 3 Yr. Avg. 13.1%
Return On Total Capital 13.1%
Ret/ On T. Cap. - 3 Yr. Avg. 14.8%
Return On Equity 16.1%
Return On Equity - 3 Yr. Avg. 16.6%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 27.8%
Gross Margin - 3 Yr. Avg. 26.8%
EBITDA Margin 19.4%
EBITDA Margin - 3 Yr. Avg. 18.3%
Operating Margin 14.4%
Oper. Margin - 3 Yr. Avg. 13.7%
Pre-Tax Margin 13.6%
Pre-Tax Margin - 3 Yr. Avg. 13.2%
Net Profit Margin 13.4%
Net Profit Margin - 3 Yr. Avg. 13%
Effective Tax Rate 1.5%
Eff/ Tax Rate - 3 Yr. Avg. 1.6%
Payout Ratio 21.4%

GIL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GIL stock intrinsic value calculation we used $3493 million for the last fiscal year's total revenue generated by Gildan Activewear Inc.. The default revenue input number comes from 2017 income statement of Gildan Activewear Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our GIL stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for GIL is calculated based on our internal credit rating of Gildan Activewear Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Gildan Activewear Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of GIL stock the variable cost ratio is equal to 88.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for GIL stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Gildan Activewear Inc..

Corporate tax rate of 27% is the nominal tax rate for Gildan Activewear Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the GIL stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for GIL are equal to 54.4%.

Life of production assets of 11.4 years is the average useful life of capital assets used in Gildan Activewear Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for GIL is equal to 41.2%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $2864 million for Gildan Activewear Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 224.413 million for Gildan Activewear Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Gildan Activewear Inc. at the current share price and the inputted number of shares is $9.1 billion.

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Financial statements of GIL
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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