GAP
The Gap, Inc.
$22.69
Stable Earnings Power
65%
P/Adj-EPS × Normalized Multiple
Moderate
·
Conviction
Undervalued
Trading 29.3% below fair value
You pay
$22.69
Bear
$25.68
Fair
$32.10
Bull
$38.52
Bear
$25.68
+13.2%
$2.14 × 12x P/E
Fair
$32.10
+41.5%
$2.14 × 15x P/E
Bull
$38.52
+69.8%
$2.14 × 18x P/E
Adjust Assumptions
15.0x
2.14$
Key Value Driver
Normalized P/E multiple (15x base case)
Implied Market Multiple
10.6x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (48 analysts)
$25.67
Divergence from AlphaVal
25%
Summary
Applying a 15x P/E to adjusted EPS of $2.14, the base-case value is $32.10 per share. DDM cross-check: $17.46.
Warnings
Dividend-based valuation: $17.46 (below our primary estimate by 46%). Large gaps may signal the dividend doesn't reflect full earning power.
Wall Street's average price target is $25.67 (from 48 analysts). Our estimate is 25% above the consensus -- consider that gap carefully.
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