Guess has gotten torched over the last six months - since November 2024, its stock price has dropped 29.5% to $12.23 per share. This was partly due to its softer quarterly results and may have investors wondering how to approach the situation.
Is now the time to buy Guess, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Do We Think Guess Will Underperform?
Even though the stock has become cheaper, we're swiping left on Guess for now. Here are three reasons why you should be careful with GES and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, Guess grew its sales at a weak 2.3% compounded annual growth rate. This fell short of our benchmarks. 
2. Projected Revenue Growth Is Slim
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 Guess’s revenue to rise by 3.6%, a slight deceleration versus its 5.6% annualized growth for the past two years. This projection doesn't excite us and implies its products and services will face some demand challenges.
3. High Debt Levels Increase Risk
As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.
Guess’s $1.42 billion of debt exceeds the $187.7 million of cash on its balance sheet. Furthermore, its 5× net-debt-to-EBITDA ratio (based on its EBITDA of $245.9 million over the last 12 months) shows the company is overleveraged.
At this level of debt, incremental borrowing becomes increasingly expensive and credit agencies could downgrade the company’s rating if profitability falls. Guess could also be backed into a corner if the market turns unexpectedly – a situation we seek to avoid as investors in high-quality companies.
We hope Guess can improve its balance sheet and remain cautious until it increases its profitability or pays down its debt.
Final Judgment
We cheer for all companies serving everyday consumers, but in the case of Guess, we’ll be cheering from the sidelines. Following the recent decline, the stock trades at 5.9× forward P/E (or $12.23 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better investments elsewhere. Let us point you toward the most entrenched endpoint security platform on the market.
Stocks We Would Buy Instead of Guess
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
