Should Value Investors Buy American Eagle Outfitters (AEO) Stock?

AEO GCO

The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

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 company to watch right now is American Eagle Outfitters (AEO - Free Report) . AEO is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A.

Investors should also recognize that AEO has a P/B ratio of 1.88. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. AEO's current P/B looks attractive when compared to its industry's average P/B of 2.97. Over the past 12 months, AEO's P/B has been as high as 2.08 and as low as 1.20, with a median of 1.57.

Finally, we should also recognize that AEO has a P/CF ratio of 9.11. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 10.78. Within the past 12 months, AEO's P/CF has been as high as 9.96 and as low as 4.61, with a median of 7.65.

If you're looking for another solid Retail - Apparel and Shoes value stock, take a look at Genesco (GCO - Free Report) . GCO is a # 2 (Buy) stock with a Value score of A.

Furthermore, Genesco holds a P/B ratio of 0.61 and its industry's price-to-book ratio is 2.97. GCO's P/B has been as high as 1.52, as low as 0.39, with a median of 0.96 over the past 12 months.

These figures are just a handful of the metrics value investors tend to look at, but they help show that American Eagle Outfitters and Genesco are likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, AEO and GCO feels like a great value stock at the moment.

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