G-III has had an impressive run over the past six months as its shares have beaten the S&P 500 by 14.4%. The stock now trades at $36.13, marking a 25.8% gain. This was partly due to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is now the time to buy G-III, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Do We Think G-III Will Underperform?
We’re happy investors have made money, but we don’t have much confidence in G-III. Here are three reasons you should be careful with GIII, plus one stock we’d rather own.
1. Long-Term Revenue Growth Disappoints
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Unfortunately, G-III’s 6% annualized revenue growth over the last five years was weak. This was below our standard for the consumer discretionary sector.
2. EPS Barely Growing
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
G-III’s EPS grew at a weak 3.5% compounded annual growth rate over the last five years, lower than its 6% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.
3. Mediocre Free Cash Flow Margin Limits Reinvestment Potential
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
G-III has shown poor cash profitability relative to peers over the last two years, giving the company fewer opportunities to return capital to shareholders. Its free cash flow margin averaged 8.2%, below what we’d expect for a consumer discretionary business.
Final Judgment
G-III falls short of our quality standards. With its shares topping the market in recent months, the stock trades at 14.5× forward P/E (or $36.13 per share). This valuation is reasonable, but the company’s shaky fundamentals present too much downside risk. There are more exciting stocks to buy at the moment. Let us point you toward one of our top digital advertising picks.
Stocks We Like More Than G-III
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Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.
