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

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Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

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 value investors might notice is American Eagle Outfitters (AEO - Free Report) . AEO is currently holding a Zacks Rank of #1 (Strong Buy) and a Value grade of A. The stock holds a P/E ratio of 13.45, while its industry has an average P/E of 15.38. AEO's Forward P/E has been as high as 16.30 and as low as 9.32, with a median of 13.53, all within the past year.

Investors should also recognize that AEO has a P/B ratio of 2.67. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 3.93. Within the past 52 weeks, AEO's P/B has been as high as 2.98 and as low as 1.24, with a median of 1.99.

Finally, we should also recognize that AEO has a P/CF ratio of 11.58. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. AEO's current P/CF looks attractive when compared to its industry's average P/CF of 13.28. Over the past year, AEO's P/CF has been as high as 12.90 and as low as 6.01, with a median of 7.87.

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


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