NYSE:GAP is probably undervalued for the fundamentals it is displaying.

Take a closer look at GAP INC/THE (NYSE:GAP), a remarkable value stock uncovered by our stock screener. NYSE:GAP excels in fundamentals and maintains a very reasonable valuation. Let's break it down further.

How We Gauge Valuation for NYSE:GAP

ChartMill assigns a Valuation Rating to each stock, ranging from 0 to 10. This rating is calculated by analyzing different valuation elements, such as price to earnings and free cash flow, both in absolute terms and relative to the market and industry. In the case of NYSE:GAP, the assigned 7 reflects its valuation:

• Compared to the rest of the industry, the Price/Earnings ratio of GAP indicates a somewhat cheap valuation: GAP is cheaper than 76.42% of the companies listed in the same industry.
• When comparing the Price/Earnings ratio of GAP to the average of the S&P500 Index (30.07), we can say GAP is valued rather cheaply.
• A Price/Forward Earnings ratio of 11.71 indicates a reasonable valuation of GAP.
• GAP's Price/Forward Earnings ratio is a bit cheaper when compared to the industry. GAP is cheaper than 74.80% of the companies in the same industry.
• GAP's Price/Forward Earnings ratio indicates a valuation a bit cheaper than the S&P500 average which is at 21.69.
• 80.49% of the companies in the same industry are more expensive than GAP, based on the Enterprise Value to EBITDA ratio.
• Compared to the rest of the industry, the Price/Free Cash Flow ratio of GAP indicates a rather cheap valuation: GAP is cheaper than 90.24% of the companies listed in the same industry.
• The low PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates a rather cheap valuation of the company.
• GAP's earnings are expected to grow with 15.47% in the coming years. This may justify a more expensive valuation.

What does the Profitability looks like for NYSE:GAP

ChartMill's Profitability Rating offers a unique perspective on stock analysis, providing scores from 0 to 10. These ratings consider a wide range of profitability metrics and margins, both in comparison to industry peers and on their own merits. For NYSE:GAP, the assigned 5 is a significant indicator of profitability:

• With a decent Return On Assets value of 6.22%, GAP is doing good in the industry, outperforming 73.17% of the companies in the same industry.
• The Return On Equity of GAP (25.05%) is better than 79.67% of its industry peers.
• Looking at the Return On Invested Capital, with a value of 9.33%, GAP is in the better half of the industry, outperforming 73.17% of the companies in the same industry.
• With a decent Profit Margin value of 4.52%, GAP is doing good in the industry, outperforming 73.98% of the companies in the same industry.
• The Operating Margin of GAP (5.58%) is better than 69.11% of its industry peers.
• GAP has a Gross Margin of 39.72%. This is in the better half of the industry: GAP outperforms 60.16% of its industry peers.

How do we evaluate the Health for NYSE:GAP?

ChartMill utilizes a Health Rating to assess stocks, scoring them on a scale of 0 to 10. This rating takes into account a variety of liquidity and solvency ratios, both in absolute terms and in comparison to industry peers. NYSE:GAP has earned a 6 out of 10:

• Looking at the Altman-Z score, with a value of 2.73, GAP is in the better half of the industry, outperforming 60.16% of the companies in the same industry.
• GAP has a debt to FCF ratio of 1.29. This is a very positive value and a sign of high solvency as it would only need 1.29 years to pay back of all of its debts.
• The Debt to FCF ratio of GAP (1.29) is better than 77.24% of its industry peers.
• Although GAP does not score too well on debt/equity it has very limited outstanding debt, which is well covered by the FCF. We will not put too much weight on the debt/equity number as it may be because of low equity, which could be a consequence of a share buyback program for instance. This needs to be investigated.
• Looking at the Quick ratio, with a value of 0.80, GAP is in the better half of the industry, outperforming 65.04% of the companies in the same industry.

Evaluating Growth: NYSE:GAP

ChartMill assigns a Growth Rating to every stock. This score ranges from 0 to 10 and evaluates the different growth aspects like EPS and Revenue, both in the past as in the future. NYSE:GAP scores a 4 out of 10:

• The Earnings Per Share has grown by an impressive 1116.67% over the past year.
• The Earnings Per Share is expected to grow by 14.94% on average over the next years. This is quite good.
• The EPS growth rate is accelerating: in the next years the growth will be better than in the last years.
• When comparing the Revenue growth rate of the last years to the growth rate of the upcoming years, we see that the growth is accelerating.

Every day, new Decent Value stocks can be found on ChartMill in our Decent Value screener.

Check the latest full fundamental report of GAP for a complete fundamental analysis.

Disclaimer

This article should in no way be interpreted as advice. The article is based on the observed metrics at the time of writing, but you should always make your own analysis and trade or invest at your own responsibility.