Gap Inc. (The) Common Stock (GAP)

FairStock Score: 55/100 — STEADY

Key Financials

Strengths

• Generates $701 million in annual free cash flow (7.6% yield on market cap)
• Strong Piotroski F-Score of 7/9 indicating robust financial health across profitability, leverage, and efficiency metrics
• High return on equity of 23.1% demonstrating efficient capital deployment
• Attractive 2.7% dividend yield providing steady income returns
• Established organization with 79,000 employees providing operational scale

Concerns

• Altman Z-Score of 1.7 places it in the financial distress zone—elevated bankruptcy risk

AI Analysis

Gap Inc. (The) Common Stock is a small-cap consumer cyclical company valued at $9.3 billion. The business generates $15.4 billion in annual revenue with a 1.1% net margin and $701 million in free cash flow. From a quality standpoint, Gap shows solid Piotroski F-Score of 7/9 and distressed Altman Z-Score of 1.7 warrants caution. On valuation, the stock is attractively valued at 11.8x earnings, with trades above its Graham Number with a negative 15% margin. Growth dynamics show revenue growing at 2.1% and profit growth of -17.0%. The 2.7% dividend yield adds an income component for patient holders. Our composite FairStock Score of 55/100 reflects mixed fundamentals overall. Investors should weigh the business quality against the current price and their own margin of safety requirements.

Bull Case

The market underappreciates Gap's consistent 23% ROE at just 12x earnings—a re-rating toward sector peers could unlock 30-50% upside. With $701 million in annual free cash flow (7.6% yield), management has ample capital for buybacks, dividends, or accretive acquisitions.

Bear Case

Macro headwinds or sector-specific disruption could pressure margins, particularly if competitive intensity increases in the consumer cyclical space. Regulatory changes, input cost inflation, or demand normalization represent underappreciated risks that could materially impact forward estimates.

Data from SEC filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer