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Is American Eagle Outfitters (AEO) a Great Value Stock Right Now?

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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 rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One company value investors might notice is American Eagle Outfitters (AEO - Free Report) . AEO is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 9.90 right now. For comparison, its industry sports an average P/E of 10.85. AEO's Forward P/E has been as high as 14.77 and as low as 8.68, with a median of 11.89, all within the past year.

We should also highlight that AEO has a P/B ratio of 2.23. 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 company's current P/B looks solid when compared to its industry's average P/B of 3.09. Over the past 12 months, AEO's P/B has been as high as 3.34 and as low as 2.02, with a median of 2.62.

Finally, we should also recognize that AEO has a P/CF ratio of 6.29. 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. AEO's current P/CF looks attractive when compared to its industry's average P/CF of 7.94. Over the past year, AEO's P/CF has been as high as 9.77 and as low as 5.58, with a median of 7.50.

Value investors will likely look at more than just these metrics, but the above data helps show that American Eagle Outfitters is likely undervalued currently. And when considering the strength of its earnings outlook, AEO sticks out at as one of the market's strongest value stocks.


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