Gildan Activewear (TSX:GIL) Could Be 48% Undervalued On Lawsuit Scrutiny

Why a new lawsuit puts Gildan Activewear under the microscope

Rosen Law Firm has launched a class action against Gildan Activewear (TSX:GIL), alleging weak internal controls, channel stuffing to inflate the appearance of revenue, and misleading statements about the business that allegedly harmed investors.

Recent trading shows how sensitive sentiment has become around Gildan Activewear. The share price has fallen 20.85% over the past 90 days and is down 34.40% year to date. At the same time, the 3 year total shareholder return of 58.55% and 5 year total shareholder return of 37.93% still leave long term holders in profitable territory. This suggests the lawsuit headlines are feeding into a broader cooling of momentum rather than a simple one day reaction.

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After a drop of more than 30% this year, Gildan Activewear now trades on very different terms to early 2026. Do the current legal and control risks still justify this discount, or has pessimism gone too far?

Most popular narrative: 48% undervalued

Against a last close of CA$56.68, the most popular narrative on Gildan Activewear anchors on a fair value of about CA$108. That gap frames the lawsuit as a test of conviction rather than the entire investment case.

Gildan's cost-efficient, ethically focused manufacturing and value-oriented products provide strong competitive advantages and support growth amid shifting consumer and regulatory trends. The company's vertically integrated and environmentally efficient manufacturing footprint, combined with U.S. cotton/yarn content, provides a strong competitive advantage as customers put heightened emphasis on ethical sourcing and as tariffs shift globally.

See why 13 investors see Gildan Activewear as 48% undervalued.

The narrative leans on a 9.25% discount rate and assumes earnings and margins improve from current levels over time. This helps bridge the gap between today’s low profit margin of 4.4% and the long term outlook. It also sits alongside a mixed scorecard, including a one off loss of US$484.7m that weighs on recent results, an expensive P/E relative to both peers and the North American luxury group, and debt that is not well covered by operating cash flow.

Analyst targets inside that story cluster around a CA$108 fair value, with a wide range of views. There are also forecasts that earnings could grow faster than both Gildan Activewear’s recent history and the broader Canadian market. The same framework flags meaningful risks, such as weaker international demand, reliance on basic apparel categories, supply chain complexity and higher ESG related costs, which all matter when thinking about how much weight to put on those long term assumptions while a securities class action is in progress.

Result: Fair Value of CA$108.02 (UNDERVALUED)

Still, that story can crack if the securities class action uncovers serious control failures, or if weak international demand persists and drags on Gildan Activewear’s growth assumptions.

Find out about the key risks to this Gildan Activewear narrative.

Another view on Gildan Activewear’s valuation

Price targets and narratives point to Gildan Activewear trading at a discount to fair value, yet the current P/E ratio of 36.3x tells a tougher story. That multiple is higher than both the peer average of 30.1x and the North American luxury group at 17x, even though profit margins recently compressed to 4.4% and earnings declined over the past year.

The fair ratio for the stock is estimated at 38.4x P/E, only slightly above the current level. This suggests less room for error if earnings or margins disappoint or if the lawsuit reshapes sentiment. For an investor trying to weigh this against the class action headlines and analyst optimism, the question is simple: How much of that rich earnings multiple are you really comfortable underwriting today?

See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

Sentiment around Gildan Activewear is clearly split right now, so consider acting promptly and review the numbers, risks and potential upsides yourself by weighing the 2 key rewards and 6 important warning signs.

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