G-III has gotten torched over the last six months - since January 2025, its stock price has dropped 23.9% to $24.72 per share. This might have investors contemplating their next move.
Is there a buying opportunity in G-III, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Do We Think G-III Will Underperform?
Despite the more favorable entry price, we don't have much confidence in G-III. Here are three reasons why we avoid GIII and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
A company’s long-term sales performance is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Regrettably, G-III’s sales grew at a weak 1.5% compounded annual growth rate over the last five years. This was below our standards.
2. Revenue Projections Show Stormy Skies Ahead
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect G-III’s revenue to drop by 1.3%, close to its 1.5% annualized growth for the past five years. This projection doesn't excite us and indicates its newer products and services will not catalyze better top-line performance yet.
3. Previous Growth Initiatives Haven’t Impressed
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
G-III historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 8.3%, somewhat low compared to the best consumer discretionary companies that consistently pump out 25%+.
Final Judgment
G-III doesn’t pass our quality test. Following the recent decline, the stock trades at 6.4× forward P/E (or $24.72 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are superior stocks to buy right now. We’d suggest looking at the most dominant software business in the world.
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