Uniform, PPE, And AI Adoption Will Expand Future Markets

Key Takeaways

• Strength in recurring uniform and apparel demand, cross-segment expansion, and digital investments supports stable revenue and sustained margin improvement.
  
• Adoption of AI, process efficiencies, and resilient sourcing lowers cost volatility and positions company for long-term growth in branding and healthcare markets.
  
• SGC faces structural and market risks from tariffs, client reliance, acquisition challenges, technological changes, and intensified competition, all threatening margins and consistent revenue growth.

Catalysts

Manufactures and sells apparel and accessories in the United States and internationally.

• Superior is positioned to benefit from sustained demand for uniforms, PPE, and healthcare apparel as workplace safety and hygiene standards remain a priority across healthcare, industrial, and hospitality sectors, likely supporting stable recurring revenue streams and improved customer retention.
  
• Corporate investment in e-commerce, branding, and employee engagement is accelerating, leading to higher demand for branded merchandise and promotional products-SGC's core segments-with the company increasing its salesforce, winning new accounts, and expanding share in fragmented markets, pointing to continued top-line growth.
  
• Strategic use of AI and automation across contact centers and branded products is driving process efficiencies, faster turnarounds, and enhanced customer satisfaction, creating long-term potential for margin expansion and operating leverage.
  
• Proven ability to actively pass through increased tariff and supply chain costs to customers and leverage a diversified, redundant sourcing strategy reduces volatility in gross margins and shields earnings from external shocks.
  
• Cross-segment integration, selective acquisitions, and investments in digital channels (including healthcare DTC and wholesale) position SGC to capitalize on long-term growth sectors, grow multi-year contract wins, and steadily raise EBITDA and net margins over time.

Superior Group of Companies Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Superior Group of Companies's revenue will grow by 2.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from 1.4% today to 2.4% in 3 years time.
• Analysts expect earnings to reach $15.3 million (and earnings per share of $1.09) by about August 2028, up from $8.3 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 18.3x on those 2028 earnings, down from 24.0x today. This future PE is greater than the current PE for the US Luxury industry at 18.2x.
• Analysts expect the number of shares outstanding to decline by 4.8% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.97%, as per the Simply Wall St company report.

Superior Group of Companies Future Earnings Per Share Growth

Risks

• Rising tariffs, ongoing global trade uncertainty, and the potential for new protectionist policies could increase SGC's sourcing costs and erode gross margins, especially if cost increases can't be fully passed on to customers, impacting future profitability.
  
• Customer bankruptcy and credit losses, as seen with the solar industry client, highlight SGC's exposure to customer concentration risk and revenue volatility in certain segments-if large clients are lost or major projects delayed, revenue and earnings could decline.
  
• Acquisition-based growth carries risk: While SGC is pursuing selective acquisitions, failures to integrate targets or misjudging synergies could result in operational inefficiencies, unexpected costs, and goodwill impairments, negatively affecting net margins and bottom-line results.
  
• The increasing adoption of workplace automation and AI in client industries could reduce the number of uniformed employees and the overall demand for uniforms and contact center services, putting structural pressure on SGC's long-term revenue growth.
  
• While digital transformation initiatives and AI adoption are underway internally, faster-moving, tech-enabled competitors and direct-to-consumer (DTC) brands in branded products and healthcare apparel may compress SGC's pricing power and limit revenue growth, risking gross margin erosion over time.

Valuation

• The analysts have a consensus price target of $16.25 for Superior Group of Companies based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $20.0, and the most bearish reporting a price target of just $14.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $628.1 million, earnings will come to $15.3 million, and it would be trading on a PE ratio of 18.3x, assuming you use a discount rate of 10.0%.
• Given the current share price of $12.43, the analyst price target of $16.25 is 23.5% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.