G-III Apparel Has Tons of Value Despite the Stock's New Lifetime Highs

NEW YORK (TheStreet) -- Shares of specialty retailer G-III Apparel (GIII) have skyrocketed more than 18% in just the past few trading sessions. If you're still on the sidelines waiting for a better entry point in GIII stock, good luck with that. Be prepared to wait a while longer.

Granted, at around $67 per share and up some 32% on the year, GIII stock is not cheap. Shares currently trade at 27 times trailing earnings. Compare that to the S&P 500 (SPY), which has an average price-to-earnings ratio of 21. But when has anything ever kept shares of good companies from going higher? The stock has never made it to the discount bin, and the shares are up some 38% in a span of only six months.

Why has GIII stock done so well? The company's margin expansion and strategic M&A deals have become a working formula. The New York-based retailer is also benefiting from a business that sells not only dresses, suits, sportswear and footwear, it also extends to luggage and handbags.

What sets the company apart even more? In addition to its own products, GIII also sells licensed apparel from well-known brands such as Calvin Klein, Kenneth Cole (KCP), Guess? (GES) and Estee Lauder's (EL) Tommy Hilfiger, to name a few. And these advantages recently helped the company deliver first-quarter revenue and earnings that topped Wall Street estimates.

For the quarter that ended in April, GIII reported a profit of $6.8 million, or 15 cents per share, topping average analysts' estimates by 8 cents. The earnings beat was impressive, yes. Even more impressive? Profit this year was 523% of last year's profit of $1.3 million, or 3 cents per share. Revenue during the quarter was $433 million, up more than 18% from last year, also topping Street forecasts.

But GIII shows no sign of slowing down. The company boosted its full-year sales and earnings targets by 1.2% and 6%, respectively. And earnings per share projections of $2.66 and $2.76 also mark a better-than-5% boost from prior guidance.

In a retail sector decimated by poor results and tepid consumer spending, G-III Apparel's stronger outlook justifies the reaction of its stock. The market -- as it is known to do -- rewards strength and punishes weakness.

GIII has grown its sales tenfold, from around $200 million to over $2 billion in the past decade. And what has the stock done during that span? Climbed to more than 25 times its starting value, from around $2.50 in 2005 to its recent closing price of $67.15 (split adjusted).

GIII's aggressive growth strategy has included acquisitions of Wilson Leather, Andrew Marc and Jessica Howard, among others. That has kept sales booming. And the company's ability to integrate its acquisitions and find synergies has boosted profit margins.

Despite trading near all-time highs, G-III Apparel shares can still deliver value. With 2017 consensus EPS projections of $3.11, the forward P/E looks to be around 19 -- two points higher than the S&P 500. The company is growing earnings at over 400% and is raising guidance. If that's not value I don't know what is.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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