American Eagle Outfitters Inc (AEO, Financial) experienced a significant daily loss of 15.8%, yet its 3-month performance shows a gain of 4.52%. With an Earnings Per Share (EPS) of $1.04, investors are keen to understand if the current stock price reflects the company's intrinsic value. Is American Eagle Outfitters fairly valued at its current market price? The following analysis aims to answer this pressing question for value investors.
Company Introduction
American Eagle Outfitters Inc is an established apparel and accessory retailer with a significant presence in North America and an expanding global online footprint. The company operates through two primary segments: American Eagle, the flagship brand, and Aerie, a lingerie and lifestyle retailer. With a current stock price of $16.63 and a GF Value of $17.01, a comparison of these figures will offer insights into the fair valuation of American Eagle Outfitters.
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value, combining historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. This GF Value Line is a benchmark for determining whether American Eagle Outfitters (AEO, Financial) is traded at a fair value. A price significantly above the GF Value Line suggests overvaluation, while one below indicates potential for higher future returns. Currently, American Eagle Outfitters stands as fairly valued, with a market cap of $3.30 billion, suggesting that its future return may align closely with the company's business growth rate.
Link: Discover companies that may deliver higher future returns at reduced risk.
Financial Strength
Evaluating the financial strength of a company is crucial before investing. American Eagle Outfitters' cash-to-debt ratio stands at 0.14, placing it in a less favorable position than 75.34% of its industry peers. Despite this, the company's overall financial strength is rated 7 out of 10, indicating a fair financial condition.
Profitability and Growth
Investing in consistently profitable companies is generally safer, and American Eagle Outfitters has maintained profitability for 9 out of the past 10 years. With a revenue of $5 billion and an operating margin of 6.43%, the company's profitability is ranked 7 out of 10. However, its growth has been less impressive, with a 3-year average annual revenue growth rate of -1.2%, ranking below the industry median.
Comparing ROIC and WACC
The comparison between Return on Invested Capital (ROIC) and Weighted Average Cost of Capital (WACC) is another profitability indicator. American Eagle Outfitters' ROIC of 7.53 is currently lower than its WACC of 10.24, suggesting the company may not be creating value for shareholders as efficiently as possible.
Conclusion
In summary, American Eagle Outfitters (AEO, Financial) appears to be trading at a fair value. The company's financial health is fair, and its profitability is reasonable, though its growth lags behind many competitors in the Retail - Cyclical industry. For those interested in a deeper financial analysis, American Eagle Outfitters' 30-Year Financials are available for review.
To explore high-quality companies that may offer above-average returns, visit the GuruFocus High Quality Low Capex Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
