Should Value Investors Buy American Eagle Outfitters (AEO) Stock?
While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.
Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.
Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.
One stock to keep an eye on is American Eagle Outfitters (AEO). AEO is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock is trading with P/E ratio of 14.95 right now. For comparison, its industry sports an average P/E of 15.81. Over the past year, AEO's Forward P/E has been as high as 19.09 and as low as 9.32, with a median of 13.01.
AEO is also sporting a PEG ratio of 0.79. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. AEO's PEG compares to its industry's average PEG of 0.91. Within the past year, AEO's PEG has been as high as 3.12 and as low as 0.69, with a median of 1.11.
We should also highlight that AEO has a P/B ratio of 2.34. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. This stock's P/B looks solid versus its industry's average P/B of 3.70. Over the past year, AEO's P/B has been as high as 2.36 and as low as 1.24, with a median of 1.80.
Finally, we should also recognize that AEO has a P/CF ratio of 8.99. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 12.24. Within the past 12 months, AEO's P/CF has been as high as 9.94 and as low as 6.01, with a median of 7.80.
Value investors will likely look at more than just these metrics, but the above data helps show that American Eagle Outfitters is likely undervalued currently. And when considering the strength of its earnings outlook, AEO sticks out at as one of the market's strongest value stocks.
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American Eagle Outfitters, Inc. (AEO) : Free Stock Analysis Report
