Despite Q3 Misses, American Eagle Is a Strong Value Stock – December 6, 2017

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Shares of American Eagle Outfitters (AEO Free Report) gained 2.42% on Wednesday despite missing both top and bottom line estimates in its third-quarter.

American Eagle reported Q3 earnings of $0.37 per share, which missed our Zacks Consensus Estimate of $0.39 per share. On top of that, the company’s $960.4 million in revenues missed top-line expectations by almost $5 million. Yet, the clothing company saw its stock price climb.

This movement is due in large part to the fact that American Eagle reported comparable store sales that jumped 3% from the year-ago period. This vitally important metric helped show investors that the company might be headed in the right direction during these changing retail times.

What’s more, American Eagle reported record third-quarter sales. And now the company projects it will post fourth-quarter EPS in the range of $0.42 to $0.44.

More Fundamentals

Looking forward, the company’s sales are expected to grow 4.76% in its fourth-quarter to hit $1.15 billion, based on our current Zacks Consensus Estimates. For the full-year, AEO’s earnings are projected to hit $3.72 billion, which would mark 3.16% year-over-year growth.

These aren’t eye-popping numbers, although they aren’t too shabby for a well-established company such as American Eagle. But what should get American Eagle investors excited is that the company currently offers outstanding bang for their buck at these price levels.

This clothing retailer, which has been a staple at American malls for years, currently rocks an “A” grade for Value in our Style Scores system.

American Eagle is currently trading at just 14.23x earnings, which marks a discount compared to the “Retail – Apparel and Shoes” industry’s average. Furthermore, AEO’s strong P/E ratio crushes its rivals Urban Outfitters (URBN Free Report) and Abercrombie & Fitch (ANF Free Report) and compares favorably to the S&P 500’s average.

The teen-focused retailer’s 0.78 P/S ratio also helps demonstrate its value for inventors, as they pay less than $0.80 for every dollar of American Eagle sales. The company’s P/B ratio of 2.54 is also solid compared to some of its biggest competition. 

American Eagle is currently a Zacks Rank #2 (Buy) and rocks an overall “A” VGM Grade, which is bolstered by its “B” Momentum grade in our Style Scores system. Shares of American Eagle have soared 26.16% in the last four weeks alone.

Better yet, even with today’s gains, shares of American Eagle rest over 10% below their 52-week high. This means that the retailer still has room to climb without the added burden of having to break into a new range.

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