Why American Eagle’s Valuation Doesn’t Even Matter Now
James Cullen
I’ve been keying on shares of teen retailer American Eagle (AEO) in the last month, arguing at various points about the strong brand, excellent growth prospects, and cheap valuation. Sometimes though, it is best not to overthink things.
The reasons you should buy AEO can be summed up in three lines:
1. August 22nd: Board Chairman Jay Schottenstein and Board Member Michael Jesselson buy a combined $1.07 million worth of AEO.
2. August 23rd: Schottenstein and Jesselson purchase another $3.18 milliion worth of AEO.
3. August 24th: CFO Joan Hilson adds to the insider purchasing roster with a $121,500 buy of AEO.
Of course, there are plenty of other reasons I can delineate in favor of buying AEO, such as the 10-year average ROE of 27.7%, or the extremely low 9x Operating CF and 13.8x FCF you’d be paying, but I think the three insider purchases should serve as enough of an attention-grabber. Look for American Eagle to continue to post strong growth in profitability and start outperforming the market, something the stock surprisingly hasn’t done in the last year.
Usually all loans are primarily unsecured loans and can become bad credit loans, specially if they include payday loans, not the student loans though.
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September 8th, 2007 at 10:17 pm
That’s by far the dumbest analysis for AEO I’ve seen. Look at their historical insider purchase sizes. Estimate their ROE going forward and their future CF growth. It’ll give you a better idea of their IV.
September 9th, 2007 at 12:13 pm
I’ve already done the valuation things - you can either view the summary article I linked to above, or the full report I wrote on the stock at http://www.valuestockreports.com/aeo.htm
September 12th, 2007 at 11:58 pm
[...] I see in one of my top five stocks to own right now - and that would be insider buying. There is plenty of insider buying going on at American Eagle Outfitters (AEO), however, with Board Chairman Jay Schottenstein buying [...]