Investing in high quality development shares that commerce at an inexpensive valuation ought to provide help to ship market-beating returns over time. On this article, I’ve recognized one such TSX inventory I’d purchase for 2026.

Valued at a market cap of $12 billion, Gildan Activewear (TSX:GIL) manufactures and sells attire, together with T-shirts, fleece, sports activities shirts, polos, hosiery, and extra underneath manufacturers like Gildan, Consolation Colours, American Attire, Champion, and GoldToe.

Based in 1946 and headquartered in Montreal, the corporate sells to wholesale distributors, display screen printers, retailers, and way of life manufacturers throughout North America, Europe, the Asia-Pacific area, and Latin America.

The TSX inventory has returned 115% to shareholders over the previous decade. After adjusting for dividend reinvestments, cumulative returns are nearer to 150%.

Is the TSX inventory a great purchase proper now?

Gildan Activewear delivered spectacular third-quarter outcomes whereas advancing its transformative acquisition of HanesBrands. As soon as the acquisition is full, the mixed entity is anticipated to change into a dominant pressure within the primary attire manufacturing sector.

Within the third quarter (Q3), the Canadian firm posted document adjusted earnings per share of US$1.00, a 17.6% year-over-year enhance, pushed by sturdy activewear gross sales development of 5.4% and adjusted working margins reaching 23.2%.

Administration raised its full-year adjusted earnings steerage to a spread of US$3.45 to US$3.51 whereas bettering its working margin growth outlook to roughly 70 foundation factors, up from the earlier steerage of fifty foundation factors.

The margin enchancment stems primarily from decrease manufacturing prices as investments in Bangladesh operations and yarn-optimization initiatives ship significant efficiencies.

Income development is monitoring towards mid-single digits for the complete 12 months, regardless of difficult market circumstances, the place the general imprintables market stays within the low single digits.

The corporate’s innovation pipeline continues to drive market share features at the same time as rivals battle with undercapitalization and weaker manufacturing capabilities.

Consolation Colours, celebrating its fiftieth anniversary, delivered double-digit development and stays Gildan’s fastest-growing model. It doubled manufacturing capability for Consolation Colours and plans extra growth in 2026 whereas extending the model into premium luggage, hats, and girls’s collections to seize beforehand untapped market segments.

Gildan’s acquisition of HanesBrands for US$4.4 billion in enterprise worth is anticipated to shut late 2025 or early 2026, successfully doubling revenues to roughly US$6.9 billion on a professional forma foundation.

Administration tasks at the least US$200 million in run-rate synergies by leveraging Gildan’s best-in-class, low-cost, vertically built-in manufacturing platform to optimize HanesBrands’s manufacturing footprint. The transaction is anticipated to be instantly accretive to adjusted earnings, with accretion exceeding 20% on a professional forma foundation, reflecting synergies.

The mixed firm targets annual web gross sales development of three% to five% by means of 2028, with adjusted earnings per share anticipated to develop at a compound annual price within the low 20% vary.

Gildan plans to take care of its investment-grade credit standing with web debt leverage of roughly 2.6 instances at closing, anticipating to delever again to 2 instances inside 12 to 18 months by means of sturdy free money stream era.

What’s the inventory worth goal for Gildan Activewear inventory?

Analysts monitoring the TSX inventory forecast income to extend from US$3.27 billion in 2024 to US$7.88 billion in 2029. On this interval, adjusted earnings are forecast to broaden from US$3 per share to US$6.18 per share.

Gildan inventory trades at a ahead price-to-earnings a number of of 14 instances, which is increased than its three-year common of 12.2 instances. If the TSX inventory reverts to its historic common, it ought to acquire 29% inside the subsequent 4 years. If we alter for dividends, cumulative returns may very well be nearer to 35%.

Gildan Activewear has elevated its annual dividend from US$0.33 per share in 2016 to US$0.82 per share. Analysts forecast its dividend to extend to US$1.22 per share in 2029.