Gee, the stock is trading like an almighty downgrade is...

Gee, the stock is trading like an almighty downgrade is expected.

Make no mistake, this is not a premium quality business and should not be valued by one.

But on today's market pricing of the company, even if one applied reasonably austere valuation multiples of, say, P/E = 12x and EV/EBITDA = 6x (roughly 30% discounts to the broader market multiples), it will require EBITDA, EBIT and NPAT to fall by 18%, 25% and 35%, respectively, from FY18's levels.

So the stock price is factoring in something quite dire, especially in the context of the A$ weakness compared to FY18 (currently ~11% lower than the 0.775  average level against the US dollar during FY18) and the fact that 56% of GAP's Revenue is derived offshore, with the US representing a significant 43%.

So, the A$ weakness alone is representing a meaningful earnings tailwind, meaning the market is now pricing in a very, very substantial fall in earnings, when measured on a constant currency basis.

And in the interim, the buyback continues with reasonable commitment, averaging 28% of daily volume this month since the buyback re-commenced:

Date:  Shares Bought Back (Total Daily Volume)  - % of Daily Volume
3 May: 221k (598k) - 37%
6 May: 50k (101k) - 50%
7 May: 60k (128k) - 47%
8 May: 55k (124k) - 44%
9 May: 335k (676k) - 50%
10 May: nil (174k) - 0%
13 May: 200k (2,030k) - 10%
14 May: 250k (558k) - 45%