1 Dirt-Cheap TSX Stock I’m Buying Hand Over Fist

Gildan Activewear Inc. (TSX:GIL) is a TSX stock that looks undervalued, as it battles significant macroeconomic headwinds in 2023.

| More on:

The S&P/TSX Composite Index shed 86 points on Wednesday, May 10. Some of the worst-performing sectors on the day included battery metals, base metals, and the hefty Canadian energy sector. Canadians should be looking for discounts to take advantage of as volatility has reared its head in the month of May. Today, I want to zero in on an undervalued TSX stock that is worth aggressively stacking right now. Let’s jump in.

Why this TSX stock has been throttled in recent months…

Gildan Activewear (TSX:GIL) is a Montreal-based company that manufactures and sells various apparel products in the United States, North America, Europe, Asia-Pacific, and Latin America. Shares of this TSX stock have dropped 5.8% month over month as of close on May 10. The stock is still up 8.2% so far in 2023. Moreover, it shares are up 6.5% year over year. Investors can see more of its ups and downs with the interactive price chart included below.

This TSX stock is not the only Canadian equity to take a beating in the month of May. However, this sharp dip did follow Gildan’s most recent earnings release. Is this cause for concern? Let’s scour the company’s most recent earnings report.

Should investors be excited about Gildan Activewear’s future?

The company unveiled its first-quarter (Q1) fiscal 2023 earnings on May 3. President and Chief Executive Officer Glenn J. Chamandy said that management was “pleased with our top line results having met our sales expectations for the quarter.” However, Chamandy also warned that the uncertain macroeconomic environment would continue to present challenges for Gildan going forward.

In Q1 of fiscal 2023, the company saw net sales decrease 9% from the previous year to $703 million. This was largely due to broader economic headwinds that had a negative impact on overall demand. Activewear sales fell 12% from Q1 FY2022 to $588 million. Moreover, international sales dropped 17% compared to the prior year.

Adjusted gross profit at Gildan fell $55 million year over year to $184 million, driven by the sales decline in dip in gross margins. The challenging environment led to Gildan consuming considerably more of its cash flow in the first quarter.

Here’s why I’m snatching up shares of this undervalued TSX stock today

Gildan Activewear provided an outlook in its Q1 fiscal 2023 report. It forecasts that revenue growth will be in the low single-digit range. Meanwhile, it expects adjusted diluted earnings per share to fall in a similar range that it posted in fiscal 2022. Overall, management anticipates that Gildan is well positioned to hold ground in a difficult macroeconomic climate.

Shares of this TSX stock currently possess a favourable price-to-earnings ratio of 11. The Relative Strength Index is a technical indicator that measures the price momentum of a given security. Gildan Activewear stock fell into technically oversold territory last week but has since rebounded above the 30-point mark. This TSX stock last paid out a cash dividend of $0.186 per share, which represents a 2.4% yield.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool recommends Gildan Activewear. The Motley Fool has a disclosure policy.

More on Investing

Canadian dollars are printed
Dividend Stocks

Beat the TSX With This Cash-Gushing Dividend Stock

Toronto-Dominion Bank (TSX:TD) stock could do well in the year ahead.

Read more »

monthly desk calendar
Dividend Stocks

Monthly Income: Top Dividend Stocks to Buy in November

Here are two of the best monthly dividend stocks in Canada you can buy in November 2024 and hold for…

Read more »

hand stacks coins
Investing

A Top TSX Stock to Buy Now for Real Wealth Later

Intact Financial (TSX:IFC) stock is a fantastic dividend-growth play for the next 15 years and beyond.

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Thursday, November 14

The U.S. wholesale inflation data and Fed chair Jerome Powell’s remarks about the economy will remain on TSX investors’ radar…

Read more »

Man data analyze
Tech Stocks

3 Reasons Celestica Stock Is a Screaming Buy Now

These three reasons make Celestica stock a screaming buy for long-term investors.

Read more »

profit rises over time
Dividend Stocks

These 2 Dow Stocks Are Set to Soar in 2025 and Beyond

Two Dow Jones stocks are screaming buys but Canadians must hold them in an RRSP or RRIF to avoid paying…

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

How to Use Your TFSA to Earn Ultimate Passive Income

If you have a TFSA, then you have the key to creating ultimate passive income. All you need is a…

Read more »

Confused person shrugging
Dividend Stocks

Better Buy: Fortis Stock or Hydro One Stock?

Let's do a compare and contrast of these two top utilities stocks right now, shall we?

Read more »