GAP
The Gap, Inc.
$23.39
Stable Earnings Power
65%
P/Adj-EPS × Normalized Multiple
Moderate
·
Conviction
Undervalued
Trading 27.5% below fair value
You pay
$23.39
Bear
$25.82
Fair
$32.27
Bull
$38.73
Bear
$25.82
+10.4%
$2.14 × 12x P/E
Fair
$32.27
+38.0%
$2.14 × 15x P/E
Bull
$38.73
+65.6%
$2.14 × 18x P/E
Key Value Driver
Normalized P/E multiple (15x base case)
Implied Market Multiple
10.9x
Summary
Our base-case estimate uses a valuation based on adjusted earnings per share and a normalized price-to-earnings multiple. We then blend that result with the average analyst price target of $32.67 from 48 analysts, using a 30% weight on analyst consensus. That produces an estimated intrinsic value of $32.27 per share.
Warnings
Dividend-based valuation: $21.70 (below our primary estimate by 32%). Large gaps may signal the dividend doesn't reflect full earning power.
Key Risks
- Growth DCF inappropriate — terminal value assumptions dominate
- EV/EBITDA misleading for regulated businesses where capex is mandated
- Regulatory risk is a fat tail not visible in normal multiples