Carters Inc (CRI) stock analysis

P/E below its 5-year median

Carters's P/E of 5.7 is below its own 5-year median of 11.2.

P/E below the industry

Carters's P/E of 5.7 is below the Apparel and Other Finished Products Made from Fabrics and Similar Materials median of 21.3.

EV/EBITDA below its 5-year median

Carters's EV/EBITDA of 3.7 is below its 5-year median of 6.9.

P/B below the industry

Carters's price-to-book of 1.20 is below the Apparel and Other Finished Products Made from Fabrics and Similar Materials median of 1.49.

Trading below fair value

The share price of $34.60 is below our fair value estimate of $84.85.

Margin of safety over 20%

The price is 59.2% below fair value, more than the 20% cushion we look for.

Revenue growing under 10% a year

Revenue grew -3.4% a year over the last three fiscal years, short of the 10% we look for.

EPS growing under 10% a year

Diluted EPS grew -26.4% a year over the last three fiscal years.

Earnings growth accelerating

Net income grew 147% over the last twelve months, against a 5-year average of -3.5% a year.

Growing faster than the industry

Revenue grew 5.0% over the last twelve months; the Apparel and Other Finished Products Made from Fabrics and Similar Materials median is 2.3%.

Guidance lowered

Carters lowered its fiscal year 2026 Net interest expense outlook on Oct 30, 2026.

Gross margin improving

Gross margin was 49.1% over the last twelve months, against 46.8% a year earlier.

Return on equity over 15%

Return on equity was 22.9% over the last twelve months and averaged 25.0% over five years.

Return on capital over 10%

Return on invested capital was 21.3%, above the 10% that usually covers the cost of capital.

Return on equity above the industry

Carters's return on equity of 22.9% is above the Apparel and Other Finished Products Made from Fabrics and Similar Materials median of 8.3%.

Earnings shrank over 5 years

Net income shrank 3.5% a year on average over the last five fiscal years.

Net margin above its 5-year average

Net margin was 7.4% over the last twelve months, against a 5-year average of 7.0%.

Net margin above the industry

Carters's net margin of 7.4% is above the Apparel and Other Finished Products Made from Fabrics and Similar Materials median of 2.8%.

High debt

Debt is 53.9% of shareholders' equity, above the 40% we consider low.

Debt falling against equity

Debt to equity fell from 105% five years ago to 53.9%.

Debt covered by cash flow

Operating cash flow over the last twelve months equals 63.4% of total debt.

Interest well covered

Operating income covers interest expense 6.7 times.

Short-term assets cover short-term debts

Current assets are 2.78 times current liabilities.

Bankruptcy risk in the grey zone

The Altman Z-score is 2.93; above 3 is the safe zone and below 1.8 the distress zone.

Pays a dividend

Carters paid dividends worth 2.9% of the share price over the last twelve months.

Yield below Treasuries

The 2.9% yield is below the 4.4% on a 1-year Treasury.

Yield below the top quarter

The top quarter of US dividend payers yield 3.8% or more; Carters yields 2.9%.

Dividend was cut

The dividend per share fell by more than 10% at least once in the last 10 fiscal years.

Covered by earnings

Dividends take 16.6% of net income.

Covered by free cash flow

Dividends take 11.4% of free cash flow.