Gap (GPS:NYS) Fundamental Valuation Report

Gap (GPS:NYS) Fundamental Valuation Report

Fundamental Valuation Report

Gap(GPS:NYS)

Consumer Cyclical:Apparel Retail

This Report was generated using the valuation tools available on StockCalc.com. For a free 30 day trial click here.

Close Price/Date
$31.67 (USD) 03/17/2021

Weighted Valuation
$31.07 (USD)

Overall Rating
Fairly valued to slightly Overvalued by 1.9%

Valuation Models Adjusted Book Value: $24.87 (USD)
Valuation Methods This company is:
Cash Flow: Overvalued on a Cash Flow Valuation
Comparable Company: Undervalued on a Comparable Valuation
Asset: Overvalued on an Asset Valuation
According to Analyst consensus at $27.00 this stock is Overvalued

Company Overview (GPS:NYS USD)

Price 31.67
Range 30.73 – 31.67
52 week 5.50 – 32.25
Open 31.12
Vol / Avg. 4.75M/7.78M
Mkt cap 11.87B
P/E 13.24
Div/yield 0.00/0.01
EPS -1.78
Shares 374.85M
Beta 1.62

Company Description

Gap retails apparel, accessories, and personal-care products under the Gap, Old Navy, Banana Republic, Athleta, Hill City, Janie and Jack, and Intermix brands. Old Navy generates nearly half of Gap’s sales. The firm also operates e-commerce sites, outlet stores, and specialty stores under various Gap names. Gap operates about 3,000 stores in North America, Europe, and Asia and franchises about 600 stores in Asia, Europe, Latin America, and other regions. Gap was founded in 1969 and is based in San Francisco.

Valuation Details

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for GPS:NYS

Using a discounted cash flow model we generated an intrinsic value of $11.58 (USD) for GPS:NYS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

GPS:NYS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $11.58 1% 5% 1% 5%
WACC (or Ke) 10.48 $14.32 $9.50
Terminal Growth Rate 3.00 $9.80 $13.92
Tax Rate 0.40 $13.52 $9.65
Cash Flow 1,598,560,000 $10.01 $13.16
Capital Expenditures -622,200,000 $10.98 $12.19
Long Term Debt 1,745,000,000 $11.82 $11.35

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $38.73 (USD) for GPS:NYS. We also generated a valuation of $63.78 (USD) using other metrics and comparables.
The comparable companies were Urban Outfitters (URBN:NAS), Lululemon Athletica (LULU:NAS), Ross Stores (ROST:NAS), L Brands (LB:NYS) and American Eagle Outfitters (AEO:NYS).

Company GPS:NYS End Date Value
Earnings/Share ($1.78) (USD)
Book Value/Share $6.97 (USD)
Sales/Share $36.90 (USD)
Cash Flow/Share $0.63 (USD)
EBITDA/Share ($1.08) (USD)
Price Based on Comps Adjustment Factor (%)
$0.00 (USD) -47.6
$69.38 (USD) -13.8
$69.03 (USD) -32.8
($4.04) (USD) -39.3
$0.00 (USD) -36.6
GPS:NYS Ratios Used Average Values URBN:NAS LULU:NAS ROST:NAS LB:NYS AEO:NYS
0.00 PE Ratio 1189.93 4150.00 74.00 515.33 20.37 0.00
4.54 PB Ratio 9.95 2.75 18.99 13.40 0.00 4.66
0.86 PS Ratio 3.52 1.19 10.14 3.50 1.45 1.34
49.98 PCF Ratio 25.96 14.31 62.53 19.53 8.48 24.96
0.00 EV to EBITDA 43.67 44.72 42.17 81.24 15.70 34.55

Multiples

Using a multiples approach we generated a valuation of  $16.38 (USD) for GPS:NYS

Company GPS:NYS End Date Value
Earnings/Share ($1.78) (USD)
Book Value/Share $6.97 (USD)
Sales/Share $36.90 (USD)
Cash Flow/Share $0.63 (USD)
EBITDA/Share ($1.08) (USD)
Price Based on Comps Adjustment Factor
$0.00 (USD) 0
$22.93 (USD) 0
$21.87 (USD) 0
$4.33 (USD) 0
$0.00 (USD) 0
Ratios Ratio Average
PE Ratio 12.39
PB Ratio 3.29
PS Ratio 0.59
PCF Ratio 6.83
EV to EBITDA 5.41

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  GPS:NYS for the last 10 years was  3.56

We ran the Adjusted Book Value for  GPS:NYS and generated a book value of  $6.99 (USD)
By multiplying these we get an adjusted valuation of  $24.87 (USD)

Analyst Data

In the Stockcalc database there are 3 analysts that provide a valuation for GPS:NYS. The 3 analysts have a concensus valuation for GPS:NYS for 2022 of $27.00 (USD).

GPS:NYS Gap

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
1 2 1 2.8000 Hold 2021-3-16

Current Price: 31.67 USD

Analyst Consensus
USD Millions 2022 2023 2024
Mean EPS 1.53 1.89 1.75
# EPS Analysts 5 3 1
Mean Revenue 16,219.80 16,375.30 15,996.50
# Revenue Analysts 4 2 1
Mean Target Price 27.00
Mean Cash Flow 3.14 3.27 3.42
Mean EBITDA 1,367.10 1,616.50 1,552.00
Mean Net Income 576.70 638.00 656.60
Mean Debt Outstanding -342.40 429.80 -137.50
Mean Tax Rate
Mean Growth Rate -0.60
Mean Capital Expenditure 593.60 726.60 719.80

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.

The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).

The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.

With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.

If we have Analyst coverage for the company we use the consensus target price here.

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