DCF Studio

    GIL.TO · TOR · Consumer Cyclical

    Gildan Activewear Inc.

    Also onConsensus Drift

    Implied value per share

    CAD 72.34

    Market price

    CAD 65.77

    Implied upside

    +10.0%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case · USD model at 1.3982

    AdjustedReports in USD, trades in CAD. Modelled in USD, converted at the end.
    AdjustedCapital expenditure runs at 5.4% of revenue against depreciation of 4.0%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.
    NoteRisk-free rate is an assumption: CAD assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    CAD 72.34+10.0%
    Exit multiple
    CAD 108.27+64.6%
    Market price
    CAD 65.77

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m339m677mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 3.8bnUSD 3.9bnUSD 4.0bnUSD 4.2bnUSD 4.4bn+3.8%
    EBITUSD 722.4mUSD 749.6mUSD 777.7mUSD 806.9mUSD 837.2m+3.8%
    NOPATUSD 643.6mUSD 667.8mUSD 692.9mUSD 718.9mUSD 745.8m+3.8%
    Add depreciation & amortisationUSD 149.9mUSD 155.5mUSD 161.3mUSD 167.4mUSD 173.7m+3.8%
    Less capital expenditureUSD -204.6mUSD -212.3mUSD -220.3mUSD -228.5mUSD -237.1m+3.8%
    Less increase in working capitalUSD -4.4mUSD -4.5mUSD -4.7mUSD -4.9mUSD -5.0m+3.8%
    Free cashflow to firmUSD 584.5mUSD 606.5mUSD 629.2mUSD 652.8mUSD 677.3m+3.8%
    Discount factor0.96440.89690.83410.77580.7215-
    Present valueUSD 563.7mUSD 543.9mUSD 524.8mUSD 506.4mUSD 488.7m-3.5%
    Present Value Of The ForecastUSD 2.6bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate3.30%CAD assumption - no free live source available for this market (assumption)
    Equity risk premium5.50%Market assumption
    Beta1.057Reported 1.085, pulled toward 1.0 (Blume)
    Cost of equity9.11%Risk-free + beta x equity risk premium
    Cost of debt3.75%Interest expense / average total debt
    Market capitalisationUSD 12.2bn72.5% of capital
    Total debtUSD 4.6bn27.5% of capital, book value as a proxy
    Tax rate10.9%Effective, capped at statutory
    WACC7.52%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 51.74

    79% of EV

    Forecast FCFF, final year
    USD 677.3m
    Capex at depreciation, working capital in reinvestment
    USD 764.1m
    Less reinvestment at g/ROIC (14.3% of NOPAT)
    USD -109.5m
    Capitalised
    USD 654.6m
    ROIC (reported)
    17.4%
    Terminal value, undiscounted
    USD 13.4bn
    Terminal value, discounted
    USD 9.6bn
    Enterprise value
    USD 12.3bn
    Less net debt
    USD 4.3bn
    Equity value
    USD 7.9bn

    Exit at 18.6x EBITDA

    Value per shareUSD 77.44

    84% of EV

    Terminal value, undiscounted
    USD 18.8bn
    Terminal value, discounted
    USD 13.6bn
    Enterprise value
    USD 16.2bn
    Less net debt
    USD 4.3bn
    Equity value
    USD 11.9bn

    Spread between methods: 40%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    5.52%79.9490.02103.39122.01149.77
    6.52%58.5464.1671.1580.0991.94
    7.52%44.2547.6651.7456.6862.83
    8.52%34.0436.2338.7641.7445.30
    9.52%26.3727.8329.4831.3833.57

    Outlined: this model. Green text: above today's price of 47.04. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year3.8%2.4%-1.4pp
    EBIT margin19.2%18.1%-1.1pp
    Discount rate7.5%7.8%+0.3pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.