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

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While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. 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.

American Eagle Outfitters (AEO - Free Report) is a stock many investors are watching right now. AEO is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock is trading with a P/E ratio of 13.99, which compares to its industry's average of 16.06. Over the past year, AEO's Forward P/E has been as high as 18.56 and as low as 11.09, with a median of 14.48.

Investors should also recognize that AEO has a P/B ratio of 3.13. 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. This stock's P/B looks solid versus its industry's average P/B of 4.17. Over the past year, AEO's P/B has been as high as 4.08 and as low as 1.94, with a median of 3.02.

These are just a handful of the figures considered in American Eagle Outfitters's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that AEO is an impressive value stock right now.




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