Does The Hype Around G-III Apparel Group, Ltd.’s (NASDAQ:GIII) Growth Justify Its April Share Price?

Looking at G-III Apparel Group, Ltd.’s (NASDAQ:GIII) fundamentals some investors are wondering if its last closing price of $42.09 represents a good value for money for this high growth stock. Below I will be talking through a basic metric which will help answer this question.

View our latest analysis for G-III Apparel Group

Has the GIII train has slowed down?

According to the analysts covering the company, the following few years should bring about good growth prospects for G-III Apparel Group. Expectations from 9 analysts are buoyant with earnings forecasted to rise significantly from today’s level of $2.81 to $4.069 over the next three years. On average, this leads to a growth rate of 13% each year, which signals a market-beating outlook in the upcoming years.

Is GIII’s share price justified by its earnings growth?

G-III Apparel Group is available at a price-to-earnings ratio of 14.98x, showing us it is undervalued relative to the current US market average of 18.23x , and undervalued based on its latest annual earnings update compared to the Luxury average of 17.48x .

NasdaqGS:GIII Price Estimation Relative to Market, April 18th 2019
NasdaqGS:GIII Price Estimation Relative to Market, April 18th 2019

Given that GIII’s price-to-earnings of 14.98x lies below the industry average, this already indicates that the company could be potentially undervalued. However, to be able to properly assess the value of a high-growth stock such as G-III Apparel Group, we must incorporate its earnings growth in our valuation. The PEG ratio is a great calculation to take account of growth in the stock’s valuation. A PE ratio of 14.98x and expected year-on-year earnings growth of 13% give G-III Apparel Group an acceptable PEG ratio of 1.15x. Based on this growth, G-III Apparel Group’s stock can be considered slightly overvalued , based on fundamental analysis.

What this means for you:

GIII’s current overvaluation could signal a potential selling opportunity to reduce your exposure to the stock, or it you’re a potential investor, now may not be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I highly recommend you to complete your research by taking a look at the following:

  1. Financial Health: Are GIII’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  2. Past Track Record: Has GIII been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of GIII’s historicals for more clarity.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.