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Improvement in profitability and outperformance against the industry can be important characteristics in a stock for some investors. Below, I will assess American Eagle Outfitters, Inc.'s (NYSE:AEO) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers.
Were AEO's earnings stronger than its past performances and the industry?
AEO's trailing twelve-month earnings (from 02 February 2019) of US$262m has jumped 29% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 24%, indicating the rate at which AEO is growing has accelerated. What's the driver of this growth? Well, let’s take a look at whether it is only owing to an industry uplift, or if American Eagle Outfitters has experienced some company-specific growth.
In terms of returns from investment, American Eagle Outfitters has invested its equity funds well leading to a 20% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 14% exceeds the US Specialty Retail industry of 5.6%, indicating American Eagle Outfitters has used its assets more efficiently. However, its return on capital (ROC), which also accounts for American Eagle Outfitters’s debt level, has declined over the past 3 years from 28% to 25%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as American Eagle Outfitters gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research American Eagle Outfitters to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for AEO’s future growth? Take a look at our free research report of analyst consensus for AEO’s outlook.
- Financial Health: Are AEO’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 02 February 2019. This may not be consistent with full year annual report figures.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.