Should You Buy G-III Apparel Group, Ltd (NASDAQ: GIII) at $42.88?

in INVESTING IDEAS by

G-III Apparel Group, Ltd (NASDAQ: GIII), a consumer discretionary company with a market capitalization of $2.1 billion, saw its share price increase by 17.5% over the last month. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could shares still be trading at a relatively cheap price? Let’s take a look at G-III Apparel Group’s outlook and value based on its most recent financial data to see if there are any catalysts for a price change.


Is G-III Apparel Group Still Cheap?

Good news, value investors! G-III Apparel Group is still a bargain right now. According to the valuation below, the intrinsic value for the stock is $54.41, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low.

G-III Apparel Group, Ltd Valuation Detail
Analysis Model Fair Value Upside (Downside)
10-yr DCF EBITDA Exit $62.69 46.2%
Peer EBITDA Multiples $50.03 16.7%
10-yr DCF Growth Exit $62.50 45.8%
Peer P/E Multiples $35.77 -16.6%
Earnings Power Value $61.03 42.3%
Average $54.41 26.9%

Click on any of the analyses above to view the latest model with real-time data.

G-III Apparel Group’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta of -0.43. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.


What Does The Future Of G-III Apparel Group Look Like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations.

G-III Apparel Group projected net income chartsource: finbox.io data explorer

With net income expected to grow at an average rate of 28.8% over the next couple years, the future certainly appears bright for G-III Apparel Group. It looks like higher cash flows are in the cards for shareholders, which should feed into a higher stock valuation.


How This Impacts You

Many investors separate stocks into value and growth categories based on quantitative metrics. However, one of the most famous investors in the world views this as foolish. In Warren Buffett’s 1992 letter to Berkshire Hathaway shareholders, Buffett touches upon a subject at odds with much of the investment industry:

“Most analysts feel they must choose between two approaches customarily thought to be in opposition: ‘value’ and ‘growth.’ Indeed, many investment professionals see any mixing of the two terms as a form of intellectual cross-dressing. We view that as fuzzy thinking… In our opinion, the two approaches are joined at the hip: Growth is always a component in the calculation of value.”

While investors tend to categorize stocks into value and growth, some of the most successful investors view growth as simply one component of a company’s value.

G-III Apparel Group’s optimistic future growth does not appear to have been fully factored into the current share price with the stock still trading below its intrinsic value. Therefore, it may be a good time to purchase shares or increase your position in the company.

But before making an investment decision, I recommend you continue to research G-III Apparel Group to get a more comprehensive view of the company by looking at:

Risk Metrics: what is G-III Apparel Group, Ltd’s CapEx coverage? This is the amount a company outlays for capital assets for each dollar it generates from those investments. View the company’s CapEx coverage here.

Valuation Metrics: what is G-III Apparel Group, Ltd’s price to book ratio and how does it compare to its peers? Analyze Price / Book here.

Efficiency Metrics: inventory turnover is a ratio that measures the number of times a company’s inventory is sold and replaced over the year. View G-III Apparel Group, Ltd’s inventory turnover here.

As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.

Expertise: Valuation, financial statement analysis. Matt Hogan is also a co-founder of finbox.io. His expertise is in investment decision making. Prior to finbox.io, Matt worked for an investment banking group providing fairness opinions in connection to stock acquisitions. He spent much of his time building valuation models to help clients determine an asset’s fair value. He believes that these same valuation models should be used by all investors before buying or selling a stock. His work is frequently published at InvestorPlace, Benzinga, ValueWalk, AAII, Barron’s, Seeking Alpha and investing.com. Matt can be reached at matt@finbox.io or at +1 (516) 778-6257.

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