American Eagle Outfitters (American Eagle Outfitters) Predictability Rank

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What is American Eagle Outfitters Predictability Rank?

Warren Buffett said many times that the companies he likes are:

1. Simple businesses that he understands
2. that have predictable and proven earnings and
3. with economic moat
4. those can be bought at a reasonable price.

It is hard to quantify "simple businesses that he (Buffett) understands", so we will focus on the other three characteristics instead. In GuruFocus Research: What worked in the market from 1998-2008? Part I: Introduction of Predictability Rank, we will show that the businesses that have predictable and proven earnings are usually also simple businesses that an average person could understand.

GuruFocus conducted a back test study of Warren Buffett's strategy of "buying good companies at fair prices" for the years from 1998-2008.

American Eagle Outfitters Predictability Rank Calculation

In our database there are 2403 stocks that have been traded from Jan. 2, 1998 to Aug. 31, 2008. We have the complete 10-year financial data and trading prices of these companies for this period. We rank the predictability of these companies based on the consistency of their revenue per share and EBITDA (earning before interest, tax, depreciation and amortization) per share over the past ten fiscal years, and study the correlation between the stock performances and the predictability of the business.

Our study may be subject to these biases and assumptions:

Dividend yields are not counted for investment returns
Effects of price changes due to spin-offs may not be fully adjusted
Study is subjected to survivorship bias due to de-listing, bankruptcy, LBO, M&A, etc.

The correlation between business predictability and investment returns of a company is showed below.

Correlation Between Business Predictability and Investment Returns

	Predictables	Non-Predictable	All stocks
Total Number of stocks	570	1833	2403
Total Lost Money	61	830	891
Total Lost More Than 50%	18	412	430
Total Lost More Than 90%	4	86	90
Average Gain	260.6%	100.0%	138.1%
Median Gain	150.0%	13.0%	39.0%
Maximum Gain	2852.0%	11483.0%	11483.0%
Maximum Loss	-100.0%	-100.0%	-100.0%
Annualized Average Gain	12.7%	6.7%	8.4%
Annualized Median Gain	8.9%	1.1%	3.1%

For the 570 predictable companies, we have seen strong correlation between the predictability of businesses and the stock performances over the past 10 years, regardless of the valuation of business at 1998. Accordingly, we have ranked the business predictability from 5-star to 1-star, as shown in this table.

Predictability Rank	5-Star	4.5-Star	4-Star	3.5-Star	3-Star	2.5-Star	2-Star	1-Star (non-predictable)	Average among all
% Out of All 2403 Stocks	3.3%	2.9%	3.7%	3.3%	3.3%	3.7%	3.3%	76.3%	100%
% that are in Loss (10y)	3%	10%	8%	9%	11%	18%	16%	45%	37%
Average Gain (10y)	364.6%	330.9%	278.0%	235.1%	243.5%	227.8%	154.8%	100.0%	138.1%
Median Gain (10y)	238.5%	193.5%	171.0%	159.0%	132.5%	113.5%	87.0%	13.0%	39.0%
Maximum Gainer	2228.0%	2547.0%	2452.0%	2852.0%	2432.0%	1892.0%	1807.0%	11483.0%	11483.0%
Maximum Loser	-82.0%	-53.0%	-67.0%	-100.0%	-83.0%	-100.0%	-78.0%	-100.0%	-100.0%
Annualized Average Gain	15.4%	14.6%	13.2%	12.0%	12.2%	11.7%	9.1%	6.7%	8.4%
Annualized Median Gain	12.1%	10.6%	9.8%	9.3%	8.2%	7.3%	6.0%	1.1%	3.1%

For detailed information about each predictability rank, please go to GuruFocus Research: What worked in the market from 1998-2008? Part I: Introduction of Predictability Rank

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American Eagle Outfitters (American Eagle Outfitters) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Consumer Cyclical » Retail - Cyclical » American Eagle Outfitters Inc (NYSE:AEO) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

AFG:Germany

Address

77 Hot Metal Street, Pittsburgh, PA, USA, 15203-2329

Website

https://www.aeo-inc.com

American Eagle Outfitters Inc is an apparel and accessory retailer with company stores in U.S., Canada, Mexico, and Hong Kong. The Company leases all store premises, regional distribution facilities, some of its office space, and certain information technology and office equipment. American Eagle also has an online business that ships worldwide. It operates in two segments: American Eagle and Aerie. The majority of its revenue comes from its primary brand, American Eagle, which offers an assortment of specialty apparel and accessories for women and men. Geographically, it generates the vast majority of its revenue from the United States.

Executives

Jennifer M. Foyle	officer: Global Brand President-aerie	77 HOT METAL STREET, PITTSBURGH PA 15203
Cary D Mcmillan	director	SARA LEE BRANDED APPAREL, 70 W MADISON STREET, CHICAGO IL 60602
Michael R Rempell	officer: EVP, COO NY Design Center	77 HOT METAL STREET, PITTSBURGH PA 15203
David M. Sable	director	77 HOT METAL STREET, PITTSBURGH PA 15203-2329
Noel Joseph Spiegel	director	RADIAN GROUP INC., 1601 MARKET STREET, PHILADELPHIA PA 19103
Andrew J. Mclean	officer: EVP & Chief Commercial Officer	77 HOT METAL STREET, PITTSBURGH PA 15203
Steven A Davis	director	3776 SOUTH HIGH ST, COLUMBUS OH 43207
Marisa Baldwin	officer: EVP - CHRO	C/O ASCENA RETAIL GROUP, INC., 933 MACARTHUR BOULEVARD, MAHWAH NJ 07430
Charles F Kessler	officer: EVP-Mdsing&Design Off-AEBrand	6301 FITCH PATH, NEW ALBANY OH 43054
Thomas R Ketteler	director	2301 WEST LAFAYETTE, DETROIT MI 48216
Stacy Siegal	officer: EVP and General Counsel	800 COMMONWEALTH DRIVE, SUITE 100, WARRENDALE PA 15086
Keefer James H Jr	officer: VP, Controller & CAO	77 HOT METAL STREET, PITTSBURGH PA 15203
Michael A. Mathias	officer: EVP and CFO	77 HOT METAL STREET, PITTSBURGH PA 15203
Deborah A Henretta	director	ONE RIVERFRONT PLAZA, CORNING NY 14831
Jay L Schottenstein	director, 10 percent owner, officer: Chairman of the Board	1800 MOLER ROAD, COLUMBUS OH 43207