American Eagle (AEOS)

[lychee10]

i just finished reading the book. These are the numbers i got for aeos from excel auto (MSN).

analyst est EPS growth rate 14.8
historical PE 18
future EPS 7.95
future stock price 145.51
sticker price 35.97
MOS 17.98


management is great. salary.com is awesome! you guys should check it out. i searched james o'donnelle (ceo) and his pay is a less than abercrombie ceo (mike jeffries). plus he owns more than 60% of the company with absolutely no stock options unlike abercrombie. i was considering abercrombie but after i looked at their salary, i noticed mike didn't own any of the company stock and he had a lot and i mean a lot of stock options. i know that abercrombie has a higher roic but it seems like their ceo just wants to put money in his pocket more than the future of the company. how did i do so far for a youngin. pls let me know what you guys think. i would really appreciate it. thanx

[steve44]

Good job.

Your numbers pretty much match my numbers so great job if you just got done reading the book !!

Now as soon as the stock price gets down around your MOS, it will be time start considering the buy.

MOS now is around 18.

Stock price is still a tad high at 33.

Thanks

[lychee10]

thanx steve! can somebody put up the excel chart from investortool for me. i just wanted to compare my numbers.

[Marc]

American Eagle Outfitters, Inc. is a retailer that designs, markets and sells its own brand of clothing targeting 15 to 25-year-olds in its United States and Canadian retail stores. Its collection includes standards, such as jeans and graphic T-shirts, as well as essentials, such as accessories, outerwear, footwear, basics and swimwear that are marketed under its American Eagle Outfitters, American Eagle and AE brand names. It also distributes merchandise via its e-commerce operation, ae.com, which offers additional sizes, colors and styles of AE merchandise. As of January 28, 2006, it operated 869 American Eagle Outfitters stores in the United States and Canada. On January 27, 2006, the Company entered into an agreement to sell certain assets of National Logistics Services (NLS) to 6510965 Canada Inc. On February 28, 2006, it completed the sale of these assets. NLS was a distribution center near Toronto, which handled all of the distribution needs for the Company's Canadian stores.

[ktf]

American Eagle Oufitters (now AEO since it now trades on NSX) appears to be below its MOS. I have a MOS of 25.50, based upon a growth rate of 15% and historical P/E of 26.5. Its current P/E is also quite reasonable, around 13, and below some of its competitors.
It also appears to have a good brand moat. I saw some great numbers suggesting it is #1 among its demographic.
Any insight about management? I'm somewhat concerned about high CEO compensation.

[poisontee]

Originally Posted by ktf

American Eagle Oufitters (now AEO since it now trades on NSX) appears to be below its MOS. I have a MOS of 25.50, based upon a growth rate of 15% and historical P/E of 26.5. Its current P/E is also quite reasonable, around 13, and below some of its competitors.
It also appears to have a good brand moat. I saw some great numbers suggesting it is #1 among its demographic.
Any insight about management? I'm somewhat concerned about high CEO compensation.

Just happened to have calculated AEO's today. Our numbers are very close. I haven't done much research on CEO

Here is my take on AEO:
RULE #1 GROWTH RATE 22%( Lowest of equity Growth for 9, 5, 3 TTM) Dont
use the analyst Growth rate of 16%. I thought thats too conservative!

Current EPS (TTM) $1.76
RULE #1 P/E 16( AVERAGE 10 yr PE)
Future EPS Calc $12.86
Future Stock Price Calc $201.97
Sticker Price Calc $49.92
MOS Price $24.96
Current Price $24.04

[FiatSlug]

I also have AEO on my watchlist. However, I came up with a much lower MOS. I think the major difference is that I'm using 15% for the growth rate. According to Investools, the 5 year equity growth rate is about 15%. Therefore my MOS is in the $14-$15 range.

[Leeb06]

Originally Posted by FiatSlug

I also have AEO on my watchlist. However, I came up with a much lower MOS. I think the major difference is that I'm using 15% for the growth rate. According to Investools, the 5 year equity growth rate is about 15%. Therefore my MOS is in the $14-$15 range.

I think Investools numbers a low for the 5 year equity growth rate. Based on the companies filings I have their equity growth rate closer to 23%. That being said I wouldn't use a growth rate over 20%.

[FiatSlug]

I just double-checked and it does look like Investools' 5 year figure is low. This is not the first time I've found issues with their data...

I know some people feel that the company's earnings will grow by more than 15% going forward. Since I don't shop at AEOS regularly, I would love to hear from other investors why they feel the earnings will grow near or above 20% per year.

Thanks.

[npg]

Originally Posted by FiatSlug

I just double-checked and it does look like Investools' 5 year figure is low. This is not the first time I've found issues with their data...

I know some people feel that the company's earnings will grow by more than 15% going forward. Since I don't shop at AEOS regularly, I would love to hear from other investors why they feel the earnings will grow near or above 20% per year.

Thanks.

The macro economic picture with American consumer debt is a concern here. Otherwise the projections look fine. You will never be able to predict by how much earnings will grow. Such undertakings are highly speculative in nature.

A better indicator is to get a feel for the company's intrinsic value. Often, looking a simple ratios gives a very telling picture.

The median PE is about 16. The trailing PE is about 13.5. From that you can conclude that there is a bit of negative sentiment about AOE. 0 debt is great too!

The price you pay for a security detemines the returns you get. Let's have a look at the earnings yield.

1.765 / 23.84 * 100 = 7% I would argue that the price is pretty much middle of the road.

Now lets see how cheap the stock is compared to its net working capital:

750,000,000 / 218,759,933 = 3.43$ per share.

That doesn't sound like you get much of a discount today. Take HOV for eg, a stock that performed very nicely for me as of late. This one is currently way under intrinsic value. The main concern with HOV is debt however.

3,634,800,000 / 62,197,977 = 58.44$ per share

HOV currently trades at 14.45$ (when I considered them they were at 11.52$).

So, which of the two gives you a greater share of working capital? Which one is likely to be trading over and which one is likely to be trading under intrinsic value?

AEO is a good retailer (without moat) and is expected to grow anything between 15% to 28% annually until 2012. This sort of growth can fail to materialize as the economic climate deteriorates further. Consumer debt is another big concern. Like sub-prime mortgages, this one can prove to become a pretty nasty, quite widely spread, pinch in the butt. If things don't pan out expect a no moat business like this to fall into single digit PE's. This could sink the stock to a range of 14.6$ - 17.00$. AEO is fully priced right now. This does not mean that there won't be any appreciation of principal in the future, just don't fool yourself believing that you get a 50% margin of safety at current price levels.

It can make for a nice solid investment with moderate risk. It is not, however, a value buy. The value buy would be in the 14$ - 17$ range IMO.

Hope this helps a little ;)