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The blank T-shirt – that humble staple of the apparel industry – has been very good to investors of Gildan Activewear Inc.

Gildan's stock tripled through 2012 and 2013 as the low-cost manufacturer exploited its dominant position in the North American printwear segment. It currently trades at about 16.6 times this year's estimated earnings.

Now the company is showing progress in establishing its own brands, which could fuel the next phase of growth not yet priced into the stock, say analysts.

"If you have a longer-term perspective, or even just for a 12-to-24-month investment, this company has an excellent management team and they're doing all the right things," said Michele Robitaille, managing director of Canadian equity at Guardian Capital.

Despite the recent runup in share price, Gildan has a reputation for volatility, or what Mark Petrie of CIBC World Markets calls a "trading stock."

A couple of major corrections may have made some investors leery of the stock. The first occurred in 2008 and 2009 as the U.S. economy shrivelled, crushing Gildan's sales volumes and lopping more than 80 per cent off of the stock's 2008 peak of about $41 in little over one year.

The second big retreat coincided with the cotton bubble. In March, 2011, cotton futures, responding to major supply disruptions amid spiking demand, reached $2.19 (U.S.) per pound, more than three-and-a-half times the 10-year average.

Profitability was affected through fiscal 2012, as Gildan worked its way through high-cost cotton purchased during the bubble. The commodity's price has since normalized at about 85 cents per pound, and is expected to decline further.

"In our view, Gildan has put a good amount of distance between itself and the two massive corrections in its share price," said Mr. Petrie, who has a target price of about $68.70 (Canadian) on the stock.

The bigger challenge for the company, and the opportunity for capital gains for investors, lies in executing ambitious expansion plans through a few different channels.

First, the company is planning $300-million to $350-million in capital expenditures during the current fiscal year to increase capacity and refurbish its manufacturing plants in Honduras and the United States. Gildan is also expected to soon announce the location for a new textile facility in either Costa Rica or Nicaragua.

Those plans could combine to add $1-billion in incremental annual revenue, according to Neil Linsdell, an analyst at Industrial Alliance Securities.

Mr. Linsdell recently initiated coverage of Gildan with a "strong buy" recommendation and a $74 share price target, representing a 30-per-cent premium over Thursday's closing price of $56.66.

Increased capacity should help Gildan expand outside Canada and the United States; international markets currently represent less than 10 per cent of consolidated sales.

Beyond building new capacity, the company expects its branded apparel to be the other big contributor to growth this year.

Long content to focus on supplying undecorated clothing for the screen print market, Gildan is making a big push toward securing shelf space to sell its own brands, including Gildan brand underwear and Gold Toe socks.

Although the Gildan branding strategy is still in its early stages, in the quarter ended Dec. 29, 2013, branded apparel sales accounted for more than 40 per cent of the company's $451.4-million (U.S.) in revenue, while the Gildan brand itself now contributes about 75 per cent of the branded segment's sales. "The enormity of the win that is the traction of the Gildan brand … is not reflected in Gildan's current valuation, in our opinion," Kenric Tyghe, a retail analyst at Raymond James, said in a recent note.

That's not to say the branding initiative is without risk. For the company, this is somewhat "unknown territory," said David Cockfield, portfolio manager at Northland Wealth Management. "These guys have dominated the market they've been in and now they're launching into areas that to my mind are quite different."

For investors who believe the company can pull it off, a recent pullback may have opened up a buying opportunity. Over the past month, the stock has declined by 5.5 per cent as some investors have taken profits after a big run, while others have moved out of the consumer discretionary sector, Guardian's Ms. Robitaille said.

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