NYSE:AEO, an undervalued stock with good fundamentals.

AMERICAN EAGLE OUTFITTERS (NYSE:AEO) has caught the attention of our stock screener as a great value stock. NYSE:AEO excels in profitability, solvency, and liquidity, all while being very reasonably priced. Let's delve into the details.

ChartMill's Evaluation of Valuation

ChartMill assigns a proprietary Valuation Rating to each stock. The score is computed by evaluating various valuation aspects, like price to earnings and free cash flow, both absolutely as relative to the market and industry. NYSE:AEO was assigned a score of 8 for valuation:

• With a Price/Earnings ratio of 11.32, the valuation of AEO can be described as very reasonable.
• Based on the Price/Earnings ratio, AEO is valued cheaply inside the industry as 80.17% of the companies are valued more expensively.
• AEO is valuated cheaply when we compare the Price/Earnings ratio to 31.73, which is the current average of the S&P500 Index.
• A Price/Forward Earnings ratio of 10.59 indicates a reasonable valuation of AEO.
• AEO's Price/Forward Earnings ratio is a bit cheaper when compared to the industry. AEO is cheaper than 79.34% of the companies in the same industry.
• AEO is valuated cheaply when we compare the Price/Forward Earnings ratio to 22.71, which is the current average of the S&P500 Index.
• Based on the Enterprise Value to EBITDA ratio, AEO is valued cheaper than 85.12% of the companies in the same industry.
• 76.03% of the companies in the same industry are more expensive than AEO, based on the Price/Free Cash Flow ratio.
• The low PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates a rather cheap valuation of the company.
• The decent profitability rating of AEO may justify a higher PE ratio.

Profitability Assessment of NYSE:AEO

ChartMill assigns a Profitability Rating to every stock. This score ranges from 0 to 10 and evaluates the different profitability ratios and margins, both absolutely, but also relative to the industry peers. NYSE:AEO scores a 6 out of 10:

• With a decent Return On Assets value of 7.01%, AEO is doing good in the industry, outperforming 75.21% of the companies in the same industry.
• AEO has a Return On Equity of 14.64%. This is in the better half of the industry: AEO outperforms 72.73% of its industry peers.
• With a decent Return On Invested Capital value of 11.14%, AEO is doing good in the industry, outperforming 78.51% of the companies in the same industry.
• The last Return On Invested Capital (11.14%) for AEO is above the 3 year average (10.41%), which is a sign of increasing profitability.
• AEO's Profit Margin of 4.58% is fine compared to the rest of the industry. AEO outperforms 74.38% of its industry peers.
• AEO's Operating Margin of 8.01% is fine compared to the rest of the industry. AEO outperforms 79.34% of its industry peers.

Understanding NYSE:AEO's Health

ChartMill assigns a Health Rating to every stock. This score ranges from 0 to 10 and evaluates the different health aspects like liquidity and solvency, both absolutely, but also relative to the industry peers. NYSE:AEO scores a 7 out of 10:

• AEO has an Altman-Z score of 4.30. This indicates that AEO is financially healthy and has little risk of bankruptcy at the moment.
• Looking at the Altman-Z score, with a value of 4.30, AEO belongs to the top of the industry, outperforming 82.64% of the companies in the same industry.
• There is no outstanding debt for AEO. This means it has a Debt/Equity and Debt/FCF ratio of 0 and it is amongst the best of the sector and industry.
• AEO's Current ratio of 1.57 is fine compared to the rest of the industry. AEO outperforms 62.81% of its industry peers.
• AEO has a Quick ratio of 0.74. This is in the better half of the industry: AEO outperforms 64.46% of its industry peers.

Unpacking NYSE:AEO's Growth Rating

A key component of ChartMill's stock assessment is the Growth Rating, which spans from 0 to 10. This rating evaluates diverse growth factors, such as EPS and revenue growth, considering both past performance and future projections. NYSE:AEO has received a 5 out of 10:

• AEO shows a strong growth in Earnings Per Share. In the last year, the EPS has been growing by 51.24%, which is quite impressive.
• Based on estimates for the next years, AEO will show a quite strong growth in Earnings Per Share. The EPS will grow by 11.98% on average per year.
• The EPS growth rate is accelerating: in the next years the growth will be better than in the last years.

Our Decent Value screener lists more Decent Value stocks and is updated daily.

Check the latest full fundamental report of AEO for a complete fundamental analysis.

Keep in mind

Important Note: The content of this article is not intended as trading advice. It is essential to perform your own analysis and exercise caution when making trading decisions. The article presents observations created by automated analysis but does not guarantee any trading or investment outcomes. Always trade responsibly and make independent judgments.