People can say anything, but they almost never lie with their wallets. When people are willing to put money on the line, it shows you their true feelings. The number of digits tells you about their conviction.
So, when Morris Goldfarb, Chief Executive Officer and Chairman of G-III Apparel Group, Ltd. NASDAQ: GIII, wrote a check to buy $1,058,800 of GIII stock, he made an emphatic statement without saying a word. The pen is truly mighty.
Shelling out more than a mil is enough for some to buck up and follow the insider blindly. However, we don’t roll like that. Instead, we look at insider transactions like high-net worth family account managers scrutinize hedge fund managers. What’s the track record?
It turns out Mr. Goldfarb is pretty good at knowing what side of the trade to be on.
He bought a big chunk of stock in December 2017 at an average price of $34.955. He started selling G-III fairly aggressively in the middle of June 2018 between $47.11 and $47.69. In total, he sold 770,000 shares at a cost average of $47.32, pocketing a profit in excess of $9.5 million. Yeah, you read that right, a fat profit of more than 35% in seven months. Mr. Morris smiled all the way to the bank.
Check this out, the story only gets better. After the CEO booked $9.5 extra-large in June, G-III shares topped out at a little more than $50 during intra-day trading. Shares fell in earnest beginning in September 2018, rebounded for most of 2018, and then crashed again to the low-to-mid $20s at the end of May 2019.
That, my friends, is called selling at the high. Coincidence for sure <sarc>.
And now Mr. Goldfarb is biting at the apple again. On June 13th, he bought 37,106 shares at $25.39 and another 40,000 shares at $26.47, as we noted above. He’s already made $190,000 as of the close of trading on July 15th.
Wall Street apparently agrees with the CEO’s view. The one-year price target for the apparel manufacturer is $38.11. That’s 34% upside if the stock matches analysts’ consensus price tag. Currently, GIII trades at just 10.18 times its earnings per share of $2.79.
For the full year, the street sees a bottom line of $3.25 per share. As of this writing, the consumer cyclical company trades at just 8.74 times forward earnings projections. During the last five years, the average price-to-earnings ratio (P/E) for G-III Apparel Group is 20.56. Put that number on $3.25 per share in profits and the stock would trade at $66.82.
Admittedly, 135% upside is more than a little rich. The current P/E of 10.18 is not hard to imagine considering investors are willing to pay that multiple today. Shareholders would make 33% in the next six to twelve months if earnings match the current consensus and the stock trades at today’s valuation.
Another quick way to estimate where GIII’s price might land is analyzing price-to-sales (P/S). Presently, traders value the stock at 0.45 times last year’s $3.1 billion top line. That’s much closer to the bottom than the top of GIII’s five-year P/S range of 0.38 to 1.49.
Analysts forecast sales of $3.27 billion for the current fiscal year. At the half-decade average of 0.78, GIII would trade at $52 and change. Again, that price tag seems out of range. However, a slight increase to 0.55 wouldn’t be out of the question, spotting shares at $36.76.
The mid-to-upper $30s is not out of whack as price action shows the stock is currently the early phases of an uptrend. An uptrend is marked by higher highs and higher lows, sort of like walking up stairs. If GIII can close above $30ish, then it could straight line to $32. If buyers can propel the price above $33, then $36 might come into focus rather quickly.
In case you don’t know, G-III Apparel Group, Ltd. designs, sources, and markets women’s and men’s apparel in the United States and internationally. The company operates in two segments, Wholesale Operations and Retail Operations.
They market apparel and other products under proprietary brand names, including DKNY, Donna Karan and licensed brands such as Calvin Klein, Tommy Hilfiger, Karl Lagerfeld Paris, Guess, Kenneth Cole, Cole Haan, Levi’s, and Dockers.
G-III also has licenses with the National Football League, Major League Baseball, National Basketball Association, National Hockey League, as well as approximately 150 U.S. colleges and universities.
You probably have some of their stuff hanging up in your closet and folded neatly in your dresser drawers. If Chairman Morris Goldfarb is right again, and our quick evaluations prove accurate, you too could wear a GIII smile all the way to the bank too.