This post was published prior to this platform’s re-branding as Sophon Microcap Atlas (with an exclusive focus on sub-$500M market cap companies). Coverage of GIL is moving to our sister publication - AlphaArk
I have initiated a position in GIL 0.00%↑ , and as a standard disclaimer am noting that nothing written below represents investment advice. Please consult your fiduciary prior to making any investment decisions.
The opportunity at Gildan, a “compounding machine”
The goal of my investment practice is to identify “compounding machines” - dominant businesses with high returns on invested capital that should be able to create substantial value as they re-invest profits.
The company we’ll be discussing today - Gildan Activewear ($GIL) - has displayed clear signs of being a compounding machine, delivering a ~11,807% return to shareholders since its IPO in 1998. Since 1998, Gildan Activewear has grown its revenues at a ~15% CAGR and EBIT at a ~13% CAGR.
Today you can buy Gildan, a business generating ROICs of ~17-22%, at only ~10x NTM EBITDA.
I believe GIL 0.00%↑ has a clear path to $6.00 EPS by FY28. If you tack on a 15-18x forward EPS multiple to that estimate, you get my PT range of $90-108, which represents significant upside to the current share price of $48.
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