Although the S&P 500 is down 5.4% over the past six months, G-III’s stock price has fallen further to $25.58, losing shareholders 18.3% of their capital. This may have investors wondering how to approach the situation.

Is now the time to buy G-III, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free .

Even though the stock has become cheaper, we're swiping left on G-III for now. Here are three reasons why GIII doesn't excite us and a stock we'd rather own.

Why Do We Think G-III Will Underperform?

Founded as a small leather goods business, G-III (NASDAQ:GIII) is a fashion and apparel conglomerate with a diverse portfolio of brands.

1. Long-Term Revenue Growth Flatter Than a Pancake

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Unfortunately, G-III struggled to consistently increase demand as its $3.18 billion of sales for the trailing 12 months was close to its revenue five years ago. This wasn’t a great result and is a sign of poor business quality.

2. Revenue Projections Show Stormy Skies Ahead

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect G-III’s revenue to drop by 2.4%, a decrease from its flat sales for the past two years. This projection doesn't excite us and suggests its products and services will face some demand challenges.

3. Previous Growth Initiatives Haven’t Impressed

Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

G-III historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 7.8%, somewhat low compared to the best consumer discretionary companies that consistently pump out 25%+.

Final Judgment

G-III falls short of our quality standards. After the recent drawdown, the stock trades at 6.4× forward price-to-earnings (or $25.58 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are superior stocks to buy right now. Let us point you toward a safe-and-steady industrials business benefiting from an upgrade cycle .