In a world of ups and downs, there is a little-known stock that doesn’t appear to conform to its peers in the marketplace.
American Eagle Outfitters Inc. (AEO, Financial) is a retail sector stock that looks to be doing just fine in a world dominated by Amazon (AMZN, Financial) and online shopping. It operates over 1,000 locations in the U.S. and abroad, both online and in brick-and-mortar stores. A key factor in rising sales is a campaign, launched in 2014, which aims to celebrate young women of all shapes and sizes.
In a week where tensions over tariffs have clouded the atmosphere, it's very likely the stock has slipped under the radar of investors. Just a day ago, American Eagle Outfitters stock hit its 52-week high of $21.35, compared to a low of $10.23 a share. In the last 12 months, the stock has soared by 54%.
By late afternoon on Friday, it stood at $21 a share, down 1%. The Standard & Poor's 500 was down 2% to 2,609.63. The Dow Jones Industrial Average was down 2.33% to 23,934.76.
Growth in sales
The brand's staples are jeans for both sexes and trend-setting styles that enjoy ubiquity on shows like Marvel’s "Runaways" on Hulu, which is owned by Disney (DIS, Financial). But much of its growth over the last several years can be attributed to a sub-brand line that has been producing double-digit comparable sales, records showed.
As a result, net revenue for the company went up 5% to $3.8 billion from $3.6 billion in the prior year. It ended the year with no debt and $222 million in free cash flow.
Guru investors like George Soros (Trades, Portfolio) have taken part in its successes. Soros has made an estimated gain of 38% since he began buying shares in the first quarter of 2017. He last added over 1.2 million shares for an average purchase price of $15.03 a share in the final months of the year.
Striking a nerve
American Eagle Outfitters struck a major nerve with its target audience of young women ages 15 to 25 in 2014 when it launched the Aerie campaign. Aerie is the brand’s lingerie and intimate apparel sub-brand, which has been doing business for more than a decade. In 2014, the Aerie campaign introduced models without touch-ups or photoshopped images.
In the company’s most recent earnings report, the Aerie brand led the company in double-digit comparable sales increases in the fourth quarter, which included the 13 weeks ended Jan. 28. Over that period, it saw sales in the Aerie sub-brand jump 34% compared to 17% in the prior-year quarter.
The Pittsburgh-based company was also able to raise its quarterly dividend by 10%. It announced last month it was paying 13.75 cents per share in dividends.
Financial data
American Eagle Outfitters saw its market cap go as high as $4 billion in 2011.
Today, it has a market cap of $3.7 billion. Its strong financials are represented in the rankings by GuruFocus of 9 out of 10 in financial strength and 7 of 10 in profitability and growth.
It has a price-earnings ratio of 18.34 versus an industry median of 20.46. It has a price-book ratio of 2.98 versus an industry median of 1.73. It also has a price-sales ratio of 0.98 versus an industry median of 0.71.
In earnings before interest, taxes, depreciation and amortization, the company has seen a steady climb over more than a decade. In 2017, it reported $19.64 a share, up from $17.95 in the prior year.
It had more than 38,700 employees as of January. It had a smaller workforce in prior years. In 2004, the company had 13,900 employees.
The Peter Lynch chart suggests the stock is slightly overvalued. Its median is $17 a share.
