The Canadian stock market is continuing to rally this year as easing monetary policy amid declining inflation continues to boost investors’ sentiments. One of the top performers of 2024 on the TSX is Gildan Activewear (TSX:GIL). The shares of this Montréal-headquartered apparel manufacturer have jumped by 59% so far this year to trade at $69.63 per share, increasing its market cap to $10.8 billion. And the momentum in GIL stock shows no sign of slowing.
In this article, I’ll break down two fundamental reasons why Gildan Activewear stock could be a smart buy right now.
Gildan’s record-breaking financial performance
When it comes to numbers, Gildan is putting up nothing short of impressive financial results. In the third quarter of 2024, the clothing company smashed records with US$891 million in sales, reflecting a 2.4% YoY (year-over-year) increase even as the consumer spending environment remains uncertain.
What’s even more remarkable is how Gildan has managed to grow its profitability alongside its revenue. In the latest quarter, its gross profit margin jumped to 31.2%, a sharp increase from 27.5% a year ago. This improvement was largely due to lower raw material costs and better manufacturing efficiencies. It shows how Gildan is trying to master the art of keeping expenses low while growing its top line. Clearly, this kind of financial performance boosts investors’ confidence because it shows the company isn’t just growing but doing so profitably.
But it doesn’t stop there. The company’s adjusted quarterly earnings also climbed by 14.9% YoY to US$0.85 per share. Similarly, it raked in $149 million in free cash flow during the quarter. And Gildan isn’t letting this money just sit idle as it continues to use this cash to reward shareholders through a combination of dividends and aggressive stock buybacks. For the fourth quarter, it declared a cash dividend of $0.205 per share, payable in mid-December 2024.
Gildan’s financial outlook looks brighter than ever
If you’re wondering whether Gildan can keep up its momentum, its updated guidance for 2024 should put your mind at ease. Despite an uncertain global economic environment, the company now expects revenue to grow in the low-single digits for the year, and that’s even after factoring in the end of a sock-licensing agreement with Under Armour. Without that headwind, its growth would have been even more impressive in the mid-single-digit range.
And it’s not just revenue. Gildan is projecting its full-year 2024 adjusted operating margins to climb above 21%, while adjusted earnings per share are projected to increase between 15.5% and 17.5% YoY.
Another key factor that makes Gildan stock so attractive right now is its relentless focus on the future. The company isn’t just relying on past successes, but it’s actively investing in new ideas and rolling out new products to keep its edge in the market. For example, Gildan’s soft cotton technology is emerging as a game-changer in the apparel industry. More importantly, this innovative product line has been well-received by consumers.
Foolish takeaway
When you take a closer look at Gildan Activewear, it’s clear why this top TSX stock has been such a strong performer in 2024. From record-breaking financial performance to a solid pipeline of innovative products, Gildan stock has all the right ingredients for long-term growth, making it really attractive to buy now and hold for years.
