AEO - American Eagle Outfitters

[valueinvestor]

I feel like the market is misvaluing American Eagle as just another retailer when it is anything but an ordinary retailer. They have a lot of brand value, and their product mix is right with a denim/jeans focus. I feel most people care more about the brand of their jeans, as opposed to their tops. Either way, the valuation is not demanding at all with 425 million in cash (no debt), and another $10-50M in restricted cash from the liabilities of unredeemed gift cards with net earnings (after taxes) of $260M you are getting a growing retailer less than 10x earnings. Not that this is a long term hold, I've purchased and sold after it ran up.

 

 

 

[valueinvestor]

http://investors.ae.com/news-releases/news-releases-details/2021/American-Eagle-Outfitters-Announces-Its-Real-Power.-Real-Growth.-Plan/default.aspx

 

I know some are not fans of clothing retailers but AEO is a company that is a quasi-mix of value and growth. Opportunity to purchase it at low prices and selling dear.

 

Assuming they hit their targets, the share price could be $27.50 to $38.50 in two years. Net Cash of $392M. A healthy dividend of 2.3%

 

Key Risk:

 

The product offering does not resonate with the market. However, considering 65% of IIRC is jean sales and a growing portion is coming from underwear - not sure how that is subject to disruption.

 

The major shareholder can be unfriendly and do a take-under. However, they have a history of being shareholder-friendly.

 

Hopefully, it will provide an idea for the ones looking for reasonably-priced stocks.