Investing in quality growth stocks that trade at a reasonable valuation should help you deliver market-beating returns over time. In this article, I have identified one such TSX stock I’d buy for 2026.
Valued at a market cap of $12 billion, Gildan Activewear (TSX:GIL) manufactures and sells apparel, including T-shirts, fleece, sports shirts, polos, hosiery, and more under brands like Gildan, Comfort Colors, American Apparel, Champion, and GoldToe.
Founded in 1946 and headquartered in Montreal, the company sells to wholesale distributors, screen printers, retailers, and lifestyle brands across North America, Europe, the Asia-Pacific region, and Latin America.
The TSX stock has returned 115% to shareholders over the past decade. After adjusting for dividend reinvestments, cumulative returns are closer to 150%.
Is the TSX stock a good buy right now?
Gildan Activewear delivered impressive third-quarter results while advancing its transformative acquisition of HanesBrands. Once the acquisition is complete, the combined entity is expected to become a dominant force in the basic apparel manufacturing sector.
In the third quarter (Q3), the Canadian company posted record adjusted earnings per share of US$1.00, a 17.6% year-over-year increase, driven by strong activewear sales growth of 5.4% and adjusted operating margins reaching 23.2%.
Management raised its full-year adjusted earnings guidance to a range of US$3.45 to US$3.51 while improving its operating margin expansion outlook to approximately 70 basis points, up from the previous guidance of 50 basis points.
The margin improvement stems primarily from lower manufacturing costs as investments in Bangladesh operations and yarn-optimization initiatives deliver meaningful efficiencies.
Revenue growth is tracking toward mid-single digits for the full year, despite challenging market conditions, where the overall imprintables market remains in the low single digits.
The company’s innovation pipeline continues to drive market share gains even as competitors struggle with undercapitalization and weaker manufacturing capabilities.
Comfort Colors, celebrating its 50th anniversary, delivered double-digit growth and remains Gildan’s fastest-growing brand. It doubled manufacturing capacity for Comfort Colors and plans additional expansion in 2026 while extending the brand into premium bags, hats, and women’s collections to capture previously untapped market segments.
Gildan’s acquisition of HanesBrands for US$4.4 billion in enterprise value is expected to close late 2025 or early 2026, effectively doubling revenues to approximately US$6.9 billion on a pro forma basis.
Management projects at least US$200 million in run-rate synergies by leveraging Gildan’s best-in-class, low-cost, vertically integrated manufacturing platform to optimize HanesBrands’s production footprint. The transaction is expected to be immediately accretive to adjusted earnings, with accretion exceeding 20% on a pro forma basis, reflecting synergies.
The combined company targets annual net sales growth of 3% to 5% through 2028, with adjusted earnings per share expected to grow at a compound annual rate in the low 20% range.
Gildan plans to maintain its investment-grade credit rating with net debt leverage of approximately 2.6 times at closing, expecting to delever back to two times within 12 to 18 months through strong free cash flow generation.
What is the stock price target for Gildan Activewear stock?
Analysts tracking the TSX stock forecast revenue to increase from US$3.27 billion in 2024 to US$7.88 billion in 2029. In this period, adjusted earnings are forecast to expand from US$3 per share to US$6.18 per share.
Gildan stock trades at a forward price-to-earnings multiple of 14 times, which is higher than its three-year average of 12.2 times. If the TSX stock reverts to its historical average, it should gain 29% within the next four years. If we adjust for dividends, cumulative returns could be closer to 35%.
Gildan Activewear has increased its annual dividend from US$0.33 per share in 2016 to US$0.82 per share. Analysts forecast its dividend to increase to US$1.22 per share in 2029.
