Is American Eagle Outfitters (AEO) Stock Undervalued Right Now?

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.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

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 to watch right now is American Eagle Outfitters (AEO). AEO is currently sporting a Zacks Rank #2 (Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 15.05 right now. For comparison, its industry sports an average P/E of 16.17. Over the past 52 weeks, AEO's Forward P/E has been as high as 18.22 and as low as 6.05, with a median of 9.56.

Investors will also notice that AEO has a PEG ratio of 0.84. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. AEO's PEG compares to its industry's average PEG of 1.04. Over the past 52 weeks, AEO's PEG has been as high as 1.05 and as low as 0.65, with a median of 0.89.

Finally, investors should note that AEO has a P/CF ratio of 7.59. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. AEO's P/CF compares to its industry's average P/CF of 15.87. AEO's P/CF has been as high as 9.27 and as low as 3.36, with a median of 5.12, all within the past year.

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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American Eagle Outfitters, Inc. (AEO): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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