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American Eagle Outfitters, Inc. (NYSE:AEO): What Can We Expect In The Future?

Andrew Edmonds

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In November 2018, American Eagle Outfitters, Inc. (NYSE:AEO) released its earnings update. Generally, analyst forecasts seem bearish, with profits predicted to drop by -0.1% next year against the past 5-year average growth rate of 21%. Currently with a trailing-twelve-month profit of US$204m, the consensus growth rate suggests that earnings will drop to US$204m by 2020. Below is a brief commentary on the longer term outlook the market has for American Eagle Outfitters. For those keen to understand more about other aspects of the company, you can research its fundamentals here.

Check out our latest analysis for American Eagle Outfitters

Exciting times ahead?

The longer term view from the 15 analysts covering AEO is one of positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To get an idea of the overall earnings growth trend for AEO, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.

NYSE:AEO Future Profit February 11th 19

From the current net income level of US$204m and the final forecast of US$224m by 2022, the annual rate of growth for AEO’s earnings is 6.1%. EPS reaches $1.77 in the final year of forecast compared to the current $1.15 EPS today. However, the near term margins may change heading into 2022, from the current levels of 5.4% to 4.9%.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For American Eagle Outfitters, I’ve put together three fundamental factors you should look at:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is American Eagle Outfitters worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether American Eagle Outfitters is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of American Eagle Outfitters? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.