American Eagle Outfitters Inc (NYSE: AEO)

Sector: Consumer Cyclical Industry: Apparel Retail CIK: 0000919012
Market Cap 4.71 Bn
P/B 2.90
P/E 22.58
P/S 0.88
ROIC (Qtr) 5.60
Div Yield % 1.88
Rev 1y % (Qtr) 5.71
Total Debt (Qtr) 1.97 Bn
Debt/Equity (Qtr) 1.21

About

American Eagle Outfitters, Inc. (AEO), a prominent player in the retail industry, is a leading global specialty retailer with a ticker symbol of AEO. The company operates and licenses nearly 1,500 retail stores worldwide and has a significant online presence through its websites, www.ae.com and www.aerie.com, in the United States and internationally. AEO's brands are unified under the core tenet of REAL, an acronym for inclusive, optimistic, and empowering, which celebrates self-expression. The company's main business activities revolve around...

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Price action

Investment thesis

Bull case

  • Operating cash flow of 424.04M provides strong 10.76x coverage of stock compensation 39.42M, indicating sustainable incentive practices.
  • Tangible assets of 3.92B provide robust 17.05x coverage of other current liabilities 230.20M, indicating strong asset backing.
  • Operating cash flow of 424.04M fully covers other non-current liabilities 57.81M by 7.33x, showing strong long-term stability.
  • Robust tangible asset base of 3.92B provides 7.24x coverage of working capital 542.23M, indicating strong operational backing.
  • Operating cash flow of 424.04M provides strong 14.70x coverage of tax liabilities 28.85M, showing excellent fiscal position.

Bear case

  • Operating cash flow of 424.04M barely covers its investment activities of (295.41M), with a coverage ratio of -1.44, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • With cash reserves of 112.83M against inventory of 891.23M, the 0.13 cash-to-inventory ratio suggests potential liquidity risks if inventory turnover slows, particularly concerning given current supply chain volatilities.
  • Operating cash flow of 424.04M provides thin coverage of dividend payments of (87.84M) with a -4.83 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Operating earnings of 285.38M show weak coverage of depreciation charges of 224.47M, with a 1.27 ratio indicating high capital intensity and potential reinvestment needs.
  • High depreciation of 224.47M relative to operating cash flow of 424.04M, which is 0.53x suggests significant maintenance capital requirements affecting free cash flow.

Peer comparison

Companies in the Apparel Retail
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 TJX Tjx Companies Inc /De/ 175.80 Bn 34.34 2.98 13.19 Bn
2 ROST Ross Stores, Inc. 58.85 Bn 28.21 2.67 5.19 Bn
3 LULU lululemon athletica inc. 25.43 Bn 14.61 2.30 1.76 Bn
4 BURL Burlington Stores, Inc. 18.26 Bn 32.57 1.63 5.94 Bn
5 GAP Gap Inc 10.00 Bn 11.75 0.65 5.52 Bn
6 URBN Urban Outfitters Inc 7.11 Bn 14.53 1.18 1.18 Bn
7 ANF Abercrombie & Fitch Co /De/ 6.17 Bn 11.82 1.19 1.13 Bn
8 BOOT Boot Barn Holdings, Inc. 5.78 Bn 27.75 2.79 0.67 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 1.57 1.35
EV to Cash from Ops. EV/CFO 15.51 8.18
EV to Debt EV to Debt 3.34 4.33
EV to EBIT EV/EBIT 23.05 -60.97
EV to EBITDA EV/EBITDA 13.23 6.53
EV to Free Cash Flow [EV/FCF] EV/FCF 41.91 22.99
EV to Market Cap EV to Market Cap 1.40 2.06
EV to Revenue EV/Rev 1.23 1.11
Price to Book Value [P/B] P/B 2.90 3.23
Price to Earnings [P/E] P/E 22.58 195.16
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 2.37 0.88
Dividend Payout Ratio % Div Payout % (Qtr) 42.80 12.58
Dividend per Basic Share Div per Share (Qtr) 0.51 0.36
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 54.36 16.33
Interest Coverage Int. cover (Qtr) -77.01 13.58
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -35.45 -5.40
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -29.57 89.63
Dividend Growth (1y) % Div 1y % (Qtr) 1.00 1.25
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -8.66 13.95
EBITDA Growth (1y) % EBITDA 1y % (Qtr) -4.10 -16.93
EBIT Growth (1y) % EBIT 1y % (Qtr) -5.50 10.85
EBT Growth (1y) % EBT 1y % (Qtr) -6.79 6.10
EPS Growth (1y) % EPS 1y % (Qtr) -0.84 10.94
FCF Growth (1y) % FCF 1y % (Qtr) -18.35 -129.32
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) -6.22 -1.75
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 1.27 1.40
Cash Payout Ratio Cash Payout (Qtr) 0.13 0.06
Cash Ratio Cash Ratio (Qtr) 0.13 0.38
Current Ratio Curr Ratio (Qtr) 1.63 1.59
Debt to Equity Ratio Debt/Equity (Qtr) 1.21 1.31
Interest Cover Ratio Int Coverage (Qtr) -77.01 13.58
Times Interest Earned Times Interest Earned (Qtr) -77.01 13.58
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 9.50 2.72
EBIT Margin % EBIT Margin % (Qtr) 5.34 -1.70
EBT Margin % EBT Margin % (Qtr) 5.41 -2.76
Gross Margin % Gross Margin % (Qtr) 37.00 40.52
Net Profit Margin % Net Margin % (Qtr) 3.90 -4.02