Gap (GPS): Net Profit Margins Rise to 5.6%, Reinforcing Value Narrative

Gap (GAP) just posted its Q3 2026 results, reporting revenue of $3.9 billion and basic EPS of $0.63, with net income coming in at $236 million. Over the last few quarters, Gap’s revenue has hovered around $3.5 to $4.1 billion, while EPS has landed between $0.51 and $0.73. Margins continue to hold their ground and overall profitability remains steady as the company moves through the year.

See our full analysis for Gap.

Next, let’s see how these results compare to the widely followed narratives, where the market’s expectations align and where they might be upended.

See what the community is saying about Gap

Net Profit Margins Edge Up to 5.6%

• Gap achieved a net profit margin of 5.6% over the last twelve months, slightly above the prior year’s 5.4% and backed by $851 million in net income on $15.3 billion in revenue.
• Consensus narrative highlights that operational discipline and cost structure improvements are driving long-term margin expansion, but points to mixed momentum:
  • Brand reinvigoration and digital investments have supported margin resilience and customer engagement, aligning with the recent uptick from 5.4% to 5.6%.
  • Stubborn operational risks such as inventory missteps and trade headwinds remain a drag, with only 1.9% forecast revenue growth outpacing profit margin gains, tempering expectations for margin acceleration.
• In a year where earnings per share rose to $2.28 on a trailing basis, analysts’ consensus view is that future margin growth will hinge on sustaining these operational gains. The five-year growth rate has slowed from 48.2% to just 3.5% this year.

📊 Read the full Gap Consensus Narrative.

Shares Trade 8.5% Below DCF Fair Value

• As of the Q3 report, Gap shares are priced at $27.53, which is 8.5% below the DCF fair value of $30.08 and implies a trailing price-to-earnings ratio of 12x, well under the US specialty retail group average of 18.9x.
• According to the consensus narrative, this valuation gap supports the bullish case for Gap, emphasizing its strong value positioning and high quality past earnings:
  • Old Navy’s consistent leadership in value segments and operational discipline are seen as key drivers behind Gap’s attractive relative pricing.
  • However, with analyst targets averaging $27.43, the muted gap compared to current price signals that the market already anticipates much of this upside, adding nuance to the “cheap stock” argument.

Dividend Instability and Insider Selling Flag Risks

• Gap’s dividend track record over the last year is described as unstable, and significant insider selling has been noted in the past three months.
• Consensus narrative points out that these risk signals are worth monitoring despite no major new concerns emerging:
  • While the broader risk assessment remains favorable, ongoing dividend uncertainty and insider activity could signal lack of confidence from within the company.
  • Notably, no other major red flags were raised, but these small cracks may affect the company’s stable outlook if they persist into coming quarters.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Gap on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

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A great starting point for your Gap research is our analysis highlighting 4 key rewards and 2 important warning signs that could impact your investment decision.

See What Else Is Out There

Persistent dividend instability and recent insider selling highlight cracks in Gap’s outlook, raising doubts about long-term shareholder rewards and company confidence.

For a more reliable income stream and signals of financial strength, check out these 1948 dividend stocks with yields > 3% where you will find alternatives offering greater dividend stability and yield potential.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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