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The Gap, Inc. (GPS)

Company Dividend Discount ModelIndustry: Apparel - RetailSector: Consumer Cyclical

Valuation Snapshot

Stable Growth$13.53 - $18.95$16.23
Multi-Stage$24.15 - $26.53$25.32
Blended Fair Value$20.77
Current Price$20.16
Upside3.05%
DecisionDon't Buy

Dividend History & Growth Metrics (10Y)

Metric5Y CAGR10Y CAGR2025202420232022202120202019201820172016
DPS-9.17%-5.18%0.590.580.580.590.000.950.980.950.960.99
YoY Growth--1.35%0.91%-2.65%0.00%-100.00%-2.41%3.32%-1.63%-2.65%-1.57%
Dividend Yield--2.93%2.70%6.01%4.77%0.00%12.19%3.77%3.29%3.67%4.27%

Stable Growth Model (Adjusted)

(USD in Millions except Per Share Data)
Net Income To Common (M)851.00
(-) Cash Dividends Paid (M)353.00
(=) Cash Retained (M)498.00
MetricLOWBASEHIGH
Required Retention Ratio20.0%12.5%7.5%
(=) Cash Required (M)170.20106.3863.83
Cash Retained (M)498.00498.00498.00
(-) Cash Required (M)-170.20-106.38-63.83
(=) Excess Retained (M)327.80391.63434.18
(/) Shares Outstanding (M)381.25381.25381.25
(=) Excess Retained per Share0.861.031.14
LTM Dividend per Share0.930.930.93
(+) Excess Retained per Share0.861.031.14
(=) Adjusted Dividend1.791.952.06
WACC / Discount Rate9.08%9.08%9.08%
Growth Rate-3.64%-2.64%-1.64%
Fair Value$13.53$16.23$18.95
Upside / Downside-32.88%-19.49%-5.99%

Multi-Stage Model: Projections

(USD in Millions)
MetricTTMDec-27Dec-28Dec-29Dec-30Dec-31Terminal
Net Income (M)851.00828.57806.73785.46764.76744.60766.94
Payout Ratio41.48%51.18%60.89%70.59%80.30%90.00%92.50%
Projected Dividends (M)353.00424.10491.20554.47614.07670.14709.41

Multi-Stage Valuation

MetricLOWBASEHIGH
WACC / Discount Rate9.08%9.08%9.08%
Growth Rate-3.64%-2.64%-1.64%
Year 1 PV (M)384.80388.80392.79
Year 2 PV (M)404.39412.83421.35
Year 3 PV (M)414.19427.21440.51
Year 4 PV (M)416.20433.75451.84
Year 5 PV (M)412.12433.95456.70
PV of Terminal Value (M)7,175.527,555.647,951.70
Equity Value (M)9,207.219,652.1710,114.89
Shares Outstanding (M)381.25381.25381.25
Fair Value$24.15$25.32$26.53
Upside / Downside19.79%25.58%31.60%

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