GAP
The Gap, Inc.
$20.35
Stable Earnings Power
65%
P/Adj-EPS × Normalized Multiple
Moderate
·
Conviction
Undervalued
Trading 32.6% below fair value
You pay
$20.35
Bear
$24.13
Fair
$30.17
Bull
$36.20
Bear
$24.13
+18.6%
$2.15 × 12x P/E
Fair
$30.17
+48.3%
$2.15 × 15x P/E
Bull
$36.20
+77.9%
$2.15 × 18x P/E
Key Value Driver
Normalized P/E multiple (15x base case)
Implied Market Multiple
9.5x
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 $25.25 from 48 analysts, using a 30% weight on analyst consensus. That produces an estimated intrinsic value of $30.17 per share.
Warnings
Dividend-based valuation: $21.70 (below our primary estimate by 33%). Large gaps may signal the dividend doesn't reflect full earning power.
Wall Street's average price target is $25.25 (from 48 analysts). Our estimate is 28% 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