Intrinsic value of Gildan Activewear, Inc. - GIL

Previous Close

$36.21

  Intrinsic Value

$15.63

stock screener

  Rating & Target

str. sell

-57%

Previous close

$36.21

 
Intrinsic value

$15.63

 
Up/down potential

-57%

 
Rating

str. sell

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 0001), $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 7.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  5.70
  5.63
  5.57
  5.51
  5.46
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
  5.14
  5.13
  5.12
  5.11
  5.09
  5.09
  5.08
  5.07
  5.06
  5.06
  5.05
  5.05
  5.04
  5.04
  5.03
Revenue, $m
  3,075
  3,248
  3,429
  3,618
  3,815
  4,022
  4,238
  4,464
  4,700
  4,948
  5,208
  5,480
  5,764
  6,063
  6,376
  6,704
  7,048
  7,408
  7,786
  8,183
  8,599
  9,036
  9,494
  9,974
  10,479
  11,008
  11,563
  12,146
  12,758
  13,400
Variable operating expenses, $m
  2,622
  2,766
  2,917
  3,074
  3,239
  3,411
  3,591
  3,779
  3,976
  4,182
  4,336
  4,563
  4,800
  5,048
  5,309
  5,582
  5,868
  6,168
  6,483
  6,814
  7,160
  7,524
  7,905
  8,305
  8,725
  9,166
  9,628
  10,113
  10,623
  11,157
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
  2,622
  2,766
  2,917
  3,074
  3,239
  3,411
  3,591
  3,779
  3,976
  4,182
  4,336
  4,563
  4,800
  5,048
  5,309
  5,582
  5,868
  6,168
  6,483
  6,814
  7,160
  7,524
  7,905
  8,305
  8,725
  9,166
  9,628
  10,113
  10,623
  11,157
Operating income, $m
  452
  481
  512
  543
  576
  611
  647
  685
  725
  766
  871
  917
  965
  1,015
  1,067
  1,122
  1,179
  1,240
  1,303
  1,369
  1,439
  1,512
  1,589
  1,669
  1,754
  1,842
  1,935
  2,033
  2,135
  2,242
EBITDA, $m
  795
  840
  886
  935
  986
  1,040
  1,096
  1,154
  1,215
  1,279
  1,346
  1,417
  1,490
  1,568
  1,648
  1,733
  1,822
  1,915
  2,013
  2,116
  2,223
  2,336
  2,455
  2,579
  2,709
  2,846
  2,990
  3,140
  3,298
  3,464
Interest expense (income), $m
  11
  36
  39
  43
  47
  50
  54
  58
  63
  67
  72
  77
  82
  87
  93
  99
  105
  112
  118
  126
  133
  141
  149
  158
  167
  177
  187
  197
  208
  220
  232
Earnings before tax, $m
  416
  442
  469
  497
  526
  557
  589
  622
  657
  694
  795
  835
  877
  922
  968
  1,017
  1,068
  1,121
  1,177
  1,236
  1,298
  1,363
  1,431
  1,502
  1,577
  1,656
  1,738
  1,825
  1,915
  2,011
Tax expense, $m
  112
  119
  127
  134
  142
  150
  159
  168
  178
  187
  215
  225
  237
  249
  261
  275
  288
  303
  318
  334
  350
  368
  386
  406
  426
  447
  469
  493
  517
  543
Net income, $m
  304
  323
  342
  363
  384
  406
  430
  454
  480
  507
  580
  610
  641
  673
  707
  742
  780
  819
  860
  903
  948
  995
  1,045
  1,097
  1,151
  1,209
  1,269
  1,332
  1,398
  1,468

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  3,176
  3,355
  3,542
  3,737
  3,941
  4,155
  4,378
  4,611
  4,856
  5,112
  5,380
  5,661
  5,955
  6,263
  6,586
  6,925
  7,281
  7,653
  8,044
  8,454
  8,883
  9,334
  9,808
  10,304
  10,825
  11,372
  11,945
  12,547
  13,179
  13,843
Adjusted assets (=assets-cash), $m
  3,176
  3,355
  3,542
  3,737
  3,941
  4,155
  4,378
  4,611
  4,856
  5,112
  5,380
  5,661
  5,955
  6,263
  6,586
  6,925
  7,281
  7,653
  8,044
  8,454
  8,883
  9,334
  9,808
  10,304
  10,825
  11,372
  11,945
  12,547
  13,179
  13,843
Revenue / Adjusted assets
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
  0.968
Average production assets, $m
  1,402
  1,481
  1,564
  1,650
  1,740
  1,834
  1,932
  2,036
  2,143
  2,256
  2,375
  2,499
  2,629
  2,765
  2,907
  3,057
  3,214
  3,378
  3,551
  3,731
  3,921
  4,120
  4,329
  4,548
  4,778
  5,020
  5,273
  5,539
  5,818
  6,110
Working capital, $m
  1,045
  1,104
  1,166
  1,230
  1,297
  1,367
  1,441
  1,518
  1,598
  1,682
  1,771
  1,863
  1,960
  2,061
  2,168
  2,279
  2,396
  2,519
  2,647
  2,782
  2,924
  3,072
  3,228
  3,391
  3,563
  3,743
  3,931
  4,130
  4,338
  4,556
Total debt, $m
  731
  795
  861
  931
  1,004
  1,080
  1,159
  1,242
  1,329
  1,420
  1,516
  1,616
  1,720
  1,830
  1,945
  2,066
  2,192
  2,325
  2,464
  2,610
  2,763
  2,924
  3,092
  3,269
  3,454
  3,649
  3,853
  4,067
  4,292
  4,528
Total liabilities, $m
  1,131
  1,194
  1,261
  1,330
  1,403
  1,479
  1,559
  1,642
  1,729
  1,820
  1,915
  2,015
  2,120
  2,230
  2,345
  2,465
  2,592
  2,724
  2,864
  3,009
  3,162
  3,323
  3,491
  3,668
  3,854
  4,048
  4,253
  4,467
  4,692
  4,928
Total equity, $m
  2,046
  2,161
  2,281
  2,407
  2,538
  2,676
  2,819
  2,970
  3,127
  3,292
  3,465
  3,645
  3,835
  4,034
  4,242
  4,460
  4,689
  4,929
  5,180
  5,444
  5,721
  6,011
  6,316
  6,636
  6,971
  7,323
  7,693
  8,081
  8,488
  8,915
Total liabilities and equity, $m
  3,177
  3,355
  3,542
  3,737
  3,941
  4,155
  4,378
  4,612
  4,856
  5,112
  5,380
  5,660
  5,955
  6,264
  6,587
  6,925
  7,281
  7,653
  8,044
  8,453
  8,883
  9,334
  9,807
  10,304
  10,825
  11,371
  11,946
  12,548
  13,180
  13,843
Debt-to-equity ratio
  0.360
  0.370
  0.380
  0.390
  0.400
  0.400
  0.410
  0.420
  0.430
  0.430
  0.440
  0.440
  0.450
  0.450
  0.460
  0.460
  0.470
  0.470
  0.480
  0.480
  0.480
  0.490
  0.490
  0.490
  0.500
  0.500
  0.500
  0.500
  0.510
  0.510
Adjusted equity ratio
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  304
  323
  342
  363
  384
  406
  430
  454
  480
  507
  580
  610
  641
  673
  707
  742
  780
  819
  860
  903
  948
  995
  1,045
  1,097
  1,151
  1,209
  1,269
  1,332
  1,398
  1,468
Depreciation, amort., depletion, $m
  343
  358
  375
  392
  410
  429
  449
  469
  491
  513
  475
  500
  526
  553
  581
  611
  643
  676
  710
  746
  784
  824
  866
  910
  956
  1,004
  1,055
  1,108
  1,164
  1,222
Funds from operations, $m
  646
  681
  717
  755
  794
  835
  878
  923
  971
  1,020
  1,055
  1,109
  1,166
  1,226
  1,288
  1,354
  1,422
  1,494
  1,570
  1,649
  1,732
  1,819
  1,910
  2,006
  2,107
  2,212
  2,323
  2,440
  2,562
  2,690
Change in working capital, $m
  56
  59
  61
  64
  67
  70
  73
  77
  80
  84
  88
  92
  97
  101
  106
  112
  117
  123
  129
  135
  141
  148
  156
  163
  171
  180
  189
  198
  208
  218
Cash from operations, $m
  590
  622
  656
  690
  727
  765
  805
  847
  890
  936
  967
  1,017
  1,069
  1,124
  1,182
  1,242
  1,305
  1,372
  1,441
  1,514
  1,590
  1,671
  1,755
  1,843
  1,935
  2,033
  2,134
  2,241
  2,354
  2,472
Maintenance CAPEX, $m
  -265
  -280
  -296
  -313
  -330
  -348
  -367
  -386
  -407
  -429
  -451
  -475
  -500
  -526
  -553
  -581
  -611
  -643
  -676
  -710
  -746
  -784
  -824
  -866
  -910
  -956
  -1,004
  -1,055
  -1,108
  -1,164
New CAPEX, $m
  -77
  -79
  -82
  -86
  -90
  -94
  -99
  -103
  -108
  -113
  -118
  -124
  -130
  -136
  -143
  -150
  -157
  -164
  -172
  -181
  -190
  -199
  -209
  -219
  -230
  -241
  -253
  -266
  -279
  -293
Cash from investing activities, $m
  -342
  -359
  -378
  -399
  -420
  -442
  -466
  -489
  -515
  -542
  -569
  -599
  -630
  -662
  -696
  -731
  -768
  -807
  -848
  -891
  -936
  -983
  -1,033
  -1,085
  -1,140
  -1,197
  -1,257
  -1,321
  -1,387
  -1,457
Free cash flow, $m
  248
  263
  277
  292
  307
  323
  340
  357
  375
  394
  397
  418
  440
  462
  486
  511
  537
  564
  593
  623
  654
  687
  722
  758
  796
  836
  877
  921
  967
  1,015
Issuance/(repayment) of debt, $m
  62
  64
  66
  69
  73
  76
  79
  83
  87
  91
  95
  100
  105
  110
  115
  121
  126
  133
  139
  146
  153
  161
  168
  177
  185
  195
  204
  214
  225
  236
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  62
  64
  66
  69
  73
  76
  79
  83
  87
  91
  95
  100
  105
  110
  115
  121
  126
  133
  139
  146
  153
  161
  168
  177
  185
  195
  204
  214
  225
  236
Total cash flow (excl. dividends), $m
  311
  326
  343
  361
  380
  399
  419
  440
  462
  485
  493
  518
  545
  572
  601
  632
  664
  697
  732
  769
  807
  848
  890
  935
  981
  1,030
  1,082
  1,135
  1,192
  1,251
Retained Cash Flow (-), $m
  -110
  -115
  -120
  -126
  -131
  -137
  -144
  -150
  -157
  -165
  -173
  -181
  -189
  -199
  -208
  -218
  -229
  -240
  -252
  -264
  -277
  -290
  -305
  -320
  -335
  -352
  -369
  -388
  -407
  -427
Prev. year cash balance distribution, $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 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
  201
  211
  223
  235
  248
  262
  275
  290
  305
  321
  320
  337
  355
  374
  393
  414
  435
  457
  480
  505
  531
  557
  585
  615
  646
  678
  712
  748
  785
  824
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
  193
  193
  194
  194
  192
  190
  186
  181
  175
  168
  152
  144
  135
  125
  115
  105
  95
  84
  74
  64
  55
  46
  38
  31
  25
  20
  15
  12
  9
  6
Current shareholders' claim on cash, %
  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 24
Price to Sales 3.2
Price to Book 3.9
Price to Tangible Book
Price to Cash Flow 15.5
Price to Free Cash Flow 20.9
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 33
Management Effectiveness
Return On Assets 12.3%
Ret/ On Assets - 3 Yr. Avg. 13.2%
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 27.9%
Gross Margin - 3 Yr. Avg. 26.8%
EBITDA Margin 19.5%
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 1.4%
Eff/ Tax Rate - 3 Yr. Avg. 1.5%
Payout Ratio 21.3%

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 $2909 million for the last fiscal year's total revenue generated by Gildan Activewear, Inc.. The default revenue input number comes from 0001 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 5.7% 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 85.4%.

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 5.4% 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 45.6%.

Life of production assets of 0 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 34%. 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 - $1936.072 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 206.646 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 $7.5 billion.

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