NYSE:GAP is a prime example of a stock that offers more than what meets the eye in terms of fundamentals.

Discover GAP INC/THE (NYSE:GAP)—an undervalued stock our stock screener has picked out. NYSE:GAP demonstrates solid fundamentals, including health and profitability, all while staying attractively priced. Let's explore the details.

How We Gauge Valuation for NYSE:GAP

ChartMill assigns a Valuation Rating to every stock. This score ranges from 0 to 10 and evaluates the different valuation aspects and compares the price to earnings and cash flows, while taking into account profitability and growth. NYSE:GAP scores a 8 out of 10:

• GAP is valuated reasonably with a Price/Earnings ratio of 11.02.
• Compared to the rest of the industry, the Price/Earnings ratio of GAP indicates a rather cheap valuation: GAP is cheaper than 88.03% of the companies listed in the same industry.
• GAP's Price/Earnings ratio indicates a rather cheap valuation when compared to the S&P500 average which is at 27.34.
• GAP is valuated reasonably with a Price/Forward Earnings ratio of 10.98.
• 78.63% of the companies in the same industry are more expensive than GAP, based on the Price/Forward Earnings ratio.
• The average S&P500 Price/Forward Earnings ratio is at 23.61. GAP is valued rather cheaply when compared to this.
• GAP's Enterprise Value to EBITDA ratio is rather cheap when compared to the industry. GAP is cheaper than 88.89% of the companies in the same industry.
• 91.45% of the companies in the same industry are more expensive than GAP, based on the Price/Free Cash Flow ratio.
• 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 17.89% in the coming years. This may justify a more expensive valuation.

Analyzing Profitability Metrics

ChartMill assigns a Profitability Rating to every stock. This score ranges from 0 to 10 and evaluates the different profitability ratios and margins, both absolutely, but also relative to the industry peers. NYSE:GAP scores a 5 out of 10:

• The Return On Assets of GAP (6.94%) is better than 76.07% of its industry peers.
• The Return On Equity of GAP (26.25%) is better than 81.20% of its industry peers.
• GAP has a better Return On Invested Capital (11.44%) than 76.92% of its industry peers.
• GAP has a Profit Margin of 5.40%. This is in the better half of the industry: GAP outperforms 78.63% of its industry peers.
• GAP has a better Operating Margin (7.10%) than 76.07% of its industry peers.
• Looking at the Gross Margin, with a value of 41.27%, GAP is in the better half of the industry, outperforming 62.39% of the companies in the same industry.

Looking at the Health

ChartMill assigns a Health Rating to every stock. This score ranges from 0 to 10 and evaluates the different health aspects like liquidity and solvency, both absolutely, but also relative to the industry peers. NYSE:GAP scores a 6 out of 10:

• GAP has a better Altman-Z score (2.73) than 60.68% of its industry peers.
• GAP has a debt to FCF ratio of 1.34. This is a very positive value and a sign of high solvency as it would only need 1.34 years to pay back of all of its debts.
• With a decent Debt to FCF ratio value of 1.34, GAP is doing good in the industry, outperforming 79.49% of the companies in the same industry.
• A Debt/Equity ratio of 0.47 indicates that GAP is not too dependend on debt financing.
• Looking at the Current ratio, with a value of 1.54, GAP is in the better half of the industry, outperforming 61.54% of the companies in the same industry.
• GAP has a better Quick ratio (0.84) than 70.09% of its industry peers.

How do we evaluate the Growth for NYSE:GAP?

Every stock receives a Growth Rating from ChartMill, ranging from 0 to 10. This rating assesses various growth aspects, including historical and projected EPS and revenue growth. NYSE:GAP boasts a 4 out of 10:

• The Earnings Per Share has grown by an impressive 1036.84% over the past year.
• GAP is expected to show quite a strong growth in Earnings Per Share. In the coming years, the EPS will grow by 14.94% yearly.
• 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.