American Eagle Outfitters, Inc. (AEO)
StocksNY
1. Valuation Metrics (Score: 7/10)
- P/E Ratio: Often trades in the low-to-mid teens—fairly in line with specialty retail peers (Gap, Abercrombie & Fitch, etc.).
- P/B Ratio: Typically around 1.5–2.0, which is neither extremely cheap nor expensive for an apparel retailer.
- Dividend Yield: Historically 2–4%. The payout ratio usually runs under ~60%, which seems sustainable in normal conditions.
Why 7?
Valuation is reasonable compared to peers, and the dividend yield is attractive, but the stock is not trading at a deep discount.
2. Financial Health (Score: 7/10)
- Debt-to-Equity Ratio: Moderately low, suggesting manageable leverage (though consider lease obligations in retail).
- Current Ratio: Often near or slightly below 1.5—enough liquidity, but not super high.
- Profit Margins: Gross and operating margins can be pressured by promotions and input costs, but remain acceptable for the retail segment.
Why 7?
They maintain a decent balance sheet and liquidity, though margins can fluctuate with economic cycles and consumer spending trends.
3. Growth Potential (Score: 6/10)
- Revenue & EPS Growth: Growth has been uneven, impacted by pandemic volatility and shifting consumer tastes. E-commerce and Aerie brand have been bright spots.
- Forward Guidance: Generally cautious, with analysts not projecting high single- or double-digit growth.
Why 6?
AEO’s core brand faces mature market conditions, but Aerie provides some growth offset. Overall, it’s more steady than high-growth.
4. Cash Flow Strength (Score: 7/10)
- Free Cash Flow (FCF): Typically positive, though can swing due to inventory builds and promotional cycles.
- FCF Yield: Often around or slightly above 4%, which can be decent for a stable retailer.
Why 7?
Consistent operating cash flow supports the dividend. Not stellar, but above average for a mid-cap retailer.
5. Industry Position (Score: 7/10)
- Competitive Moats: Strong brand recognition among teens and young adults; Aerie is a notable growth driver in intimates/athleisure.
- Market Share: Steady niche presence, though competition from fast fashion and online-only brands remains fierce.
Why 7?
AEO has a recognizable brand and loyal customer base, but fashion retail is highly competitive, limiting an extensive moat.
6. Management & Governance (Score: 7/10)
- Track Record: Leadership has navigated changing retail trends relatively well; expansions into Aerie and digital have helped.
- ESG/Governance: No major red flags; typical retail-level ESG risks (supply chain labor, environmental considerations) but generally managed.
Why 7?
Solid execution historically and no glaring governance controversies.
7. Risk Factors (Score: 6/10)
- Beta: Tends to be >1 (around 1.2-ish), making it more volatile than the overall market.
- Sector Risks: Consumer discretionary spending is cyclical, vulnerable to recessionary downturns.
Why 6?
It’s a well-known mid-cap retailer but subject to higher volatility and cyclical consumer trends.
8. Market Sentiment (Score: 7/10)
- News/Events: No major recent scandals; watchers focus on consumer trends, inventory levels, and store traffic.
- RSI Indicator: Often fluctuates around neutral (40–60); no extreme oversold/overbought signals in the recent past.
Why 7?
Sentiment is neutral to mildly positive; no big hype, but no major pessimism either.
9. Margin of Safety (Score: 7/10)
- Intrinsic Value: P/E and cash flow suggest the stock may be near fair value or slightly undervalued, depending on the model used (DCF, relative valuation, etc.).
- Discount: Likely not a “deep bargain,” but there could be some margin if you are bullish on apparel recovery and Aerie’s expansion.
Why 7?
Modest discount potential, but not the screaming deal you might find in severely beaten-down sectors.
10. Peer Comparison (Score: 7/10)
- Key Multiples: P/E, EV/EBITDA, and ROE are competitive vs. Gap, Abercrombie & Fitch, Urban Outfitters, etc.
- Overall Position: AEO sits comfortably among mid-tier apparel retailers, often with a better dividend than some peers.
Why 7?
In line or slightly better in terms of valuation and shareholder returns; not an outlier in either direction.
Total Score: 68/100
American Eagle Outfitters scores a moderate 66/100 using your checklist. Valuation and dividend yield are decent, financial health is respectable, and management has executed reasonably well. However, growth is limited and the stock remains somewhat cyclical. For investors comfortable with retail’s ups and downs, AEO could be a reasonable hold or moderate buy, especially if it trades at the lower end of its historical valuation range. Always reassess with up-to-date data and personal risk tolerance.
Disclaimer:
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The stock price could be useful. Good review, just bought AEO for 14.92. Let’s see how it goes. Good luck. Cheers
Bad luck. AEO trades @ 14.65 🙁