7 Cheap Small-Cap Stocks To Buy Now

5. The Gap, Inc. (NYSE:GAP)

PE Ratio (FWD): 11.45

Number of Hedge Fund Holders: 39

The Gap, Inc. (NYSE:GAP) is an American retailer known for its clothing and accessories. The company operates several notable brands including its namesake Gap, Banana Republic, Old Navy, and Athleta. It takes the 5th spot on our list of cheap small cap stocks to buy now.

The company offers a wide range of casual and trendy clothing and its retail approach combines physical stores with online shopping, making it easier for customers to shop. They provide convenient services like curbside pickup and the option to buy online and pick up in-store.

On September 24, Gap (NYSE:GAP) announced that it is expanding its partnership with Disney with new apparel collaborations that feature classic Gap styles combined with popular Disney characters.

These limited-edition collections will be seasonal and offer stylish designs that differ from the usual Gap × Disney products. The first release called the Gap × Disney Collegiate collection, draws inspiration from ’90s varsity styles and includes clothing and accessories featuring Mickey & Friends alongside Gap’s logo.

The collection has patchwork varsity prints in preppy colors and collegiate fonts, with items like the Gap × Disney Denim Big Shirt displaying Mickey & Friends on the back. It also features matching fleece sets and unique denim styles with Mickey designs, available for adults, kids, toddlers, and babies, priced between $14 and $149.

In Q2, Gap (NYSE:GAP) reported strong financial results, marking its sixth consecutive quarter of market share growth. The company generated net sales of $3.7 billion, up 5% from the previous year, with comparable sales increasing by 3%. Store sales rose by 4%, and the company operated 3,568 stores in around 40 countries by the end of the quarter, with 2,541 being company-operated locations. Online sales also grew by 7%, accounting for 33% of total net sales.

In addition, it reported a net income of $206 million, with diluted earnings per share of $0.54. The company closed the quarter with $2.1 billion in cash and short-term investments, a 59% increase from last year. Net cash from operating activities reached $579 million, while free cash flow was $397 million.

For 2024, analysts expect a nearly 31% year-over-year increase in its EPS. As of September 27, Gap (NYSE:GAP) is trading at a forward PE multiple of 11.45x, nearly 34% below its sector median of 17.34.