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Gap Inc. Stock Buy Recommendation Reiterated (GPS)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK ( TheStreet) -- Gap (NYSE: GPS) has been reiterated by TheStreet Ratings as a buy with a ratings score of A+ . The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, revenue growth and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

  • EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass

Highlights from the ratings report include:

  • Powered by its strong earnings growth of 65.90% and other important driving factors, this stock has surged by 43.75% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, GPS should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • GAP INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, GAP INC increased its bottom line by earning $2.32 versus $1.57 in the prior year. This year, the market expects an improvement in earnings ($2.61 versus $2.32).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Specialty Retail industry. The net income increased by 61.0% when compared to the same quarter one year prior, rising from $218.00 million to $351.00 million.
  • GPS's revenue growth trails the industry average of 27.0%. Since the same quarter one year prior, revenues rose by 10.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Specialty Retail industry and the overall market, GAP INC's return on equity significantly exceeds that of both the industry average and the S&P 500.

The Gap, Inc. operates as a specialty retailer. The company offers apparel, accessories, and personal care products for men, women, children, and babies under the Gap, Old Navy, Banana Republic, Piperlime, and Athleta brand names. Gap has a market cap of $17.24 billion and is part of the services sector and retail industry. The company has a P/E ratio of 15.4, below the S&P 500 P/E ratio of 17.7. Shares are up 14.1% year to date as of the close of trading on Thursday.

You can view the full Gap Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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