Clothier AEO: At current price, I'll add back a few shares.
I like forward p/e:
'09 (!) per Yahoo is ~ 11.5. That's lower than other apparel companies I've positions in.
A $25-26 stock with no ltd and $3 cash. Nice profit margins and nice roe past three years. I don't know whether such will continue. I hope, and bet so, though.
A Scott Black recommendation in the recent Barron's Midyear Roundtable. He's quoted there as saying:
"I recommended American Eagle Outfitters [AEO], an apparel retailer, at the 2006 Roundtable. It had a big run, we sold, and the stock has fallen back to 27.20. In the past five fiscal years, ending Jan. 31, revenue has compounded by 19.1% a year. Operating income has grown to $587 million from $158 million, up 38% a year. Operating margins have climbed to 21% from 11.4%. Sales per square foot have risen to $642 from $460. Earnings per share are $1.70, up from 46 cents. Return on equity is 28%. There is no debt and $827 million in cash on the balance sheet.
"Revenue will rise 15%, to $3.2 billion. Divide $439 million in net income by 225 million fully diluted shares, and you get $1.95 a share for the year, versus $1.70 in fiscal '07. They probably will buy back more shares. The stock trades for 13.9 times fiscal '08 estimates. The company will generate about $290 million in free cash flow this year, up from $276 million. This is a money machine. If they don't buy back shares, their cash position will increase to more than $1 billion. In the year ending January '09, earnings could grow to $2.25 a share. The P/E on fiscal '09 is 12.1. Many large-cap growth companies -- the Coca-Colas and Campbell Soups -- are 5%-6% top-line growers and 9%-10% bottom-line growers, and they're trading at 18 and 20 times earnings. American Eagle is ridiculously cheap. Yes, gasoline prices are up, but the company hasn't seen any decline in store traffic. The stock has come down substantially. This is a good entry point."
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