Why HBI Looks Fairly Valued At $23.30

Hanesbrands Inc. (NYSE: HBI) has seen decent growth in recent years. Net sales of the company rose 4.4% to $1.6 billion in Q4 2017, while sales for full year 2017 rose 7.4% to $6.5 billion driven by growth across all its segments, international diversification, and rising online sales. Looking ahead, the recently announced acquisition of Bras N Things and Alternative apparel enlarged Hanesbrands’ portfolio, supporting its activewear growth strategy. In particular, this acquisition is likely to expand the company’s existing market and channel penetration in specific geographies of Australia, New Zealand, and South Africa. Based on our current estimates, we expect the stock to be fairly valued at $23.30, a little higher than the current market price.

Our price estimate of $23.30 is based on a FY18 sales forecast of $6.68 Bil, up marginally from $6.47 Bil last fiscal. We expect a Price-to-Sales multiple of 1.28x and an average share count of 369 mn giving a share price estimate of $23.30, slightly higher than the current market price.

Our revenue estimate of $6.68 bn for FY2018 is arrived at by projecting revenues for each of the four individual segments of the Company, following historical growth trends and percentage contribution of each segment to total to the company’s top line.

Price-to-Sales ratio is also forecast taking into account the historical ratio and its likely trend. Detailed steps to arrive at our price estimate are outlined in our interactive dashboard. You can modify our assumptions to arrive at your own price estimate for the company.