If you own Gildan Activewear (TSX:GIL) stock, early 2025 probably felt like wearing one of its popular shirts straight out of a freezer. The spectre of renewed Trump tariff threats sent shivers through the market, and the Canadian apparel giant, which relies on the U.S. for a whopping 90% of its sales, got caught in the crossfire. Shares took a significant hit, falling nearly 16% from their earlier highs. As we stand here in June 2025, GIL stock is trading below $67 per share.
So, the big question is: Is this cold snap on Gildan stock a temporary blip or a deep freeze? More importantly, is Gildan stock sitting below $67 a bargain opportunity for Canadian investors?
Let’s unpack the situation.
Gildan Activewear downplays tariff impacts
The tariff fears were real. Gildan manufactures efficiently in places like Honduras and Nicaragua, and has recently increased production in Bangladesh. Any new import taxes targeting these regions could indeed squeeze some earnings margins.
The tariffs discussion took centre stage during an earnings call in April as management maintained its earlier earnings guidance for 2025 and downplayed tariff impacts because the company has significant “Made in America” yarn content in its products. So the 10% blanket tariffs had little room to destabilize the low-cost industry leader’s revenue and earnings.
But here’s where things get interesting. Despite Gildan Activewear’s recent stumble, the market hasn’t exactly given up on the apparel giant. Analysts largely maintain a “Strong Buy” rating, with an average price target hovering around $81. That suggests a potential upside of over 22% from current levels.
Gildan stock is surprisingly cheap
Should Canadian investors buy Gildan Activewear stock at current beaten-up prices? It all boils down to fundamentals and value. At under $67 per share, Gildan stock looks surprisingly cheap. It trades at a forward price-to-earnings (P/E) multiple of just 17.1. That alone might not scream bargain, but consider its earnings growth potential: its forward price-earnings-to-growth (PEG) ratio is a remarkably low 0.6. Traditionally, a PEG below 1 signals a stock is undervalued relative to its earnings growth potential. And Gildan has a stellar growth track record.
Over the past five years, while revenue grew at a steady, albeit modest, average clip of 4.3% annually, earnings per share skyrocketed by an average of 30.4%! How? Operational excellence. Gildan boasts a net income margin of 12.4%, absolutely crushing the industry average of around 4.5%. That’s serious efficiency. It also generates a stellar return on equity (ROE) of 29%, meaning it’s excellent at generating profits from shareholder investments.
The company takes its low-cost advantage and reinvests it wisely – either into even better prices to win market share, or increasingly, back into innovation.
A consistent innovator with a mid-teens earnings growth outlook
Speaking of innovation and growth, Gildan isn’t standing still. Management, echoing themes from its recent first quarter earnings call, is laser-focused on optimizing the company’s Central American footprint and maximizing capacity. The company is pushing hard into fleece products and expanding its share in soft cotton. But the real game-changer could be its new digital printing technology. This innovation drastically reduces the amount of expensive primer needed – the biggest cost in digital apparel printing. This could propel Gildan to a leading position in the fast-growing digital print market, leveraging its low-cost base in a whole new way.
Looking ahead, the company’s three-year plan through 2027 targets mid-single-digit sales growth. More importantly, management sees operating margins expanding and earnings per share growing in the mid-teens percentage range. What are the key earnings drivers? Ongoing investments in modernizing operations may cut costs further, and a consistent share buyback program may boost earnings per share by reducing the number of shares outstanding.
Investor takeaway
Gildan Activewear stock offers a compelling entry point for new long-term-oriented investment capital. The market potentially threw the baby out with the bathwater on tariff fears. While those fears are valid, Gildan’s underlying strength and growth potential seem significantly discounted at this price. For investors with a tolerance for some political risk and a medium-to-long-term horizon, scooping up Gildan shares while they trade under $67 could look like a very savvy move a year or two from now. The analysts’ $81 target certainly suggests they think the sun will come out again for this apparel leader.
