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American Eagle Outfitters, Inc. Message Board

  • jonathan.loewer jonathan.loewer Jan 22, 2011 2:25 PM Flag

    Fundamental Valuation for AEO

    AEO has $634.5 Million in cash with no debt. There are 195.7 Million shares outstanding. That is $3.24 per share.

    This company can easily earn $1.05 next year. Analyst expectations are in between $.95 and $1.35. $1.05 is a pretty conservative estimate of me, and 1.05 represents approximately between $2.95 Billion and $3.05 Billion in revenue for FY2011.

    If we give that data a conservative P/E ratio of 22 and that gives us an enterprise value of $23.10. Then by adding the $3.24 of cash per share back in and we have a valuation of $26.34.

    A conservative estimate for the end of FY2011 for AEO is $26.34. This stock is an attractive buy.

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    • Three years after this original post, I am still earning dividends on this stock as it continues to add to its pile of cash (the large special dividend cut a lot of that out though). If this stock heads down further, I will look to adding even more shares to my core position. As the stock falls, its dividend continues to get better. So I will gladly add here and wait for the turnaround just like I did last time the stock got into the 20s.

      • 1 Reply to jonathan.loewer
      • This string has the second most replies of any message on this board, as I have owned this stock almost four years now, selling chunks of my position as it went up and rebuying them on the way down. Now the stock looks to be heading up again, so I am looking forward to collecting my dividends and selling pieces of my total position as it heads higher and higher.

    • This is the 50th reply to this string! I've held this stock for over 3 years and have done a good job trading around a core position while earning regular and special dividends on those shares. As this stock trends back down I'm incrementally buying back the shares that I sold in the high teens and low twenties. I believe that the originial predicition I made of this stock reaching $26 will come true soon as this economy continues to get better (the stock already got there if you add in the regular and special dividends that it paid out over that time). This is a great cash generator and a cash-flow king. The balance sheet is still nice even after the large dividends.

    • The drop in the stock price has subtracted $500mm from the market cap of this company, but both top-line revs and bottom-line earnings continue to grow. This is a chance to rebuy some of the shares that were sold earlier for a profit. This company continues to cruise, while its competitors PacSun and Aeropostale continue to struggle. Let the dividends continue to roll in.

    • Two years after the original post on this string, the company has paid quarterly dividends, plus a special dividend, all while adding to the value of the company. The earnings continue to show that the dividend could even be raised again, as they continue to add to their pile of cash. Some people didn't like the P/E ratio of 22 or the $26 share price. If you add the dividends and the special dividend to the 52-week high, as well as look at the current multiple, this stock has achieved all my expectations.

      I have sold most of my shares as the stock has ridden to new 52-week highs, but I will continue to hold my core position of shares, as this company will have no problem continuing to pay its dividend. If the stock falls, I will rebuy on the way down most of the shares I have sold on the way up to those new highs. I am comfortable adding to my core position, as I believe this company can achieve over the next two years the kind of earnings necessary to continue to pay, and increase, its dividend, as well as retesting its 52-week high, while hopefully making new highs.

      Sentiment: Buy

    • After holding this stock for over two years, and all the discussions over time, this string has the 4th most replies of any string. Most of the people who comment on message boards are quick traders and do not stick with their holdings long enough for their investments to pan out, but this one has done really well for me over the years.

      Secondly, even though I am up greatly, this company is still a great investment. Yes, the market cap is almost $4.5 Billion, but my cost basis on the stock is a 3.5% yield even though it is only yielding 2% today. On top of that, all their cash on hand will result in another dividend soon, so I should soon be earning almost 4% on this equity.

    • I am looking forward to earnings tomorrow. Management upped guidance, and word on the Street is earnings could be even higher than the upped guidance. The "whisper number" is one cent over the high-end estimate 22 cents versus $.15-$.21 revised upward guidance. The original expectations were for $.11-$.15.

      <http://finance.yahoo.com/news/american-eagle-expected-totally-dominate-162948450.html> This article, titled "American Eagle is Expected to Dominate Back-to-School Shopping" says it best with the line "The company's had great results since former Levi's executive Robert Hansen took over last year. Sales and margins are both doing great."

      If they can beat, and continue this momentum for the rest of the year, my early 2011 expectations can be achieved by the end of the year.

    • I agree AEO can go higher in a good economy.

      However, the economy is bad right now. People cut back on everything especially on clothing. With the drought affecting 60% of the US, food price will increase in the next 6 months. Gas price begin to go up again. I think AEO will be down to the $15 to $17 range after the earning release. After that I will buy back. Right now I am shorting this stock.

      • 1 Reply to hoangph
      • I agree with everything you posted. However, even though the economy isn't great, I still believe people are willing to spend $20 on a polo shirt and $35 for a nice pair of jeans.

        I actually think the closure of 77Kids (AEO's new children's line) will be what is more likely to bring this stock down to the $15-$17 range. However, the way this stock is making higher highs and higher lows, I'd be cautious to try to short something with a chart as beautiful as this. It's been moving a perfect chanel from the bottom left of the graph at $10 last fall to $20 now. If it does fall back to $16, I'll buy back the shares I sold at a cheaper price, so it wouldn't be so bad for me if it works out as you predict.

    • "AEO has $634.5 Million in cash with no debt. There are 195.7 Million shares outstanding. That is $3.24 per share."

      A year and a half later, AEO now has $722 MM in cash with no debt, and 195.7 million shares outstanding, so the cash-on-hand is now $3.68.

      Also, When calculating the P/E ratio, remember to back that cash out, and remember to add it back in when finding a valuation: $1.05*22=$23.01+$3.68 cash-on-hand= $26.67 stock price.

      That's how it's done, folks. One should collect years of dividends of a company that is always profitable, and the accumulated profits keep adding to that pile of cash-on-hand on top of the M*E=P equation. Overtime, as earnings mount, the profits and dividends just keep adding up until one's "playing with the house's money".

    • This is looking very good. It's getting there:

      $4.00 cash-on-hand, TTM P/E of 21.4 backing out the cash (not including this quarterly report), and a forward P/E of 12.6 backing out the cash.

      If the economy stays strong, AEO should continue to march to my prediction of $26.34.

      To quote Warren Buffett: "The stock market is designed to transfer money from the active to the patient."

    • Refering to my post from a year ago, we are finally moving in the direction of my $26.00 price target.

      Earnings will continue to grow here with this growth environment with the unemployment numbers turning around. Earnings should grow from the sub-one dollar per year earnings to greater-than-one dollar earnings. This stock should continue on toward $20.00 here on this rally.

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AEO
12.98+1.39(+11.99%)Aug 20 4:01 PMEDT

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