Despite its impressive fundamentals, NYSE:GAP remains undervalued.

Uncover the potential of GAP INC/THE (NYSE:GAP) as our stock screener's choice for an undervalued stock. NYSE:GAP maintains a strong financial position and offers an appealing valuation. We'll delve into the specifics below.

ChartMill's Evaluation of Valuation

To assess a stock's valuation, ChartMill utilizes a Valuation Rating on a scale of 0 to 10. This comprehensive assessment considers various valuation aspects, comparing price to earnings and cash flows, while factoring in profitability and growth. NYSE:GAP has achieved a 8 out of 10:

• With a Price/Earnings ratio of 10.22, the valuation of GAP can be described as very reasonable.
• Based on the Price/Earnings ratio, GAP is valued cheaper than 85.95% of the companies in the same industry.
• The average S&P500 Price/Earnings ratio is at 30.16. GAP is valued rather cheaply when compared to this.
• GAP is valuated reasonably with a Price/Forward Earnings ratio of 10.05.
• Based on the Price/Forward Earnings ratio, GAP is valued a bit cheaper than the industry average as 78.51% of the companies are valued more expensively.
• GAP is valuated cheaply when we compare the Price/Forward Earnings ratio to 23.23, which is the current average of the S&P500 Index.
• Based on the Enterprise Value to EBITDA ratio, GAP is valued cheaper than 85.12% of the companies in the same industry.
• Based on the Price/Free Cash Flow ratio, GAP is valued cheaply inside the industry as 94.21% of the companies are valued more expensively.
• GAP's 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 16.09% in the coming years. This may justify a more expensive valuation.

Profitability Analysis for NYSE:GAP

ChartMill utilizes a Profitability Rating to assess stocks, scoring them on a scale of 0 to 10. This rating takes into account a variety of profitability ratios and margins, both in absolute terms and in comparison to industry peers. NYSE:GAP has earned a 5 out of 10:

• GAP's Return On Assets of 6.22% is fine compared to the rest of the industry. GAP outperforms 72.73% of its industry peers.
• GAP has a Return On Equity of 25.05%. This is amongst the best in the industry. GAP outperforms 80.17% of its industry peers.
• GAP has a better Return On Invested Capital (9.33%) than 72.73% of its industry peers.
• GAP's Profit Margin of 4.52% is fine compared to the rest of the industry. GAP outperforms 75.21% of its industry peers.
• With a decent Operating Margin value of 5.58%, GAP is doing good in the industry, outperforming 70.25% of the companies in the same industry.
• The Gross Margin of GAP (39.72%) is better than 60.33% of its industry peers.

Health Assessment of NYSE:GAP

ChartMill employs a unique Health Rating system for all stocks. This rating, ranging from 0 to 10, is determined by analyzing various liquidity and solvency ratios. For NYSE:GAP, the assigned 5 for health provides valuable insights:

• 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.
• Looking at the Debt to FCF ratio, with a value of 1.29, GAP is in the better half of the industry, outperforming 77.69% of the companies in the same industry.
• 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.
• GAP has a better Quick ratio (0.80) than 66.94% of its industry peers.

Growth Examination for 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 10250.00% over the past year.
• Based on estimates for the next years, GAP will show a quite strong growth in Earnings Per Share. The EPS will grow by 14.94% on average per year.
• The EPS growth rate is accelerating: in the next years the growth will be better than in the last years.
• The Revenue growth rate is accelerating: in the next years the growth will be better than in the last years.

More Decent Value stocks can be found in our Decent Value screener.

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

Disclaimer

This is not investing advice! The article highlights some of the observations at the time of writing, but you should always make your own analysis and invest based on your own insights.