American Story

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AEO -- USA Stock  

USD 23.20  0.21  0.91%

American Eagle Outfi is scheduled to announce its earnings today. The next earnings report is expected on the 9th of December 2020. As many of us are excited about consumer cyclical space, it is fair to outline American Eagle Outfitters as a unique alternative. We will evaluate why recent American Eagle price moves suggest a bounce in October.
Published over three months ago
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Chances of American (NYSE:AEO) to slide in October
The company has 2.27 B in debt with debt to equity (D/E) ratio of 2.28, meaning that the entity heavily relies on borrowing funds for operations. American Eagle Outfi has a current ratio of 2.3, demonstrating that it is liquid and is capable to disburse its financial commitments when the payables are due.
American Eagle financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures the total debt position of American Eagle, including all of American Eagle's outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of American Eagle assets, the company is considered highly leveraged. Understanding the composition and structure of overall American Eagle debt and outstanding corporate bonds gives a good idea of how risky the capital structure of a business is and if it is worth investing in it. Please read more on our technical analysis page.

Understanding American Total Debt

American Eagle Outfi liabilities are broken down into two parts on the balance sheet. These are short-term (or current) obligations and long-term debt. American Eagle Outfi has to fulfill its short-term liabilities in this reporting year and should be no more than 12 months old. Long-term debt, on the other hand, is anything beyond the 12-month payment timeframe. Common short-term liabilities found on American Eagle balance sheet include debt obligations and money owed to different American Eagle vendors, workers, and loan providers. Below is the chart of American main long-term debt accounts currently reported on its balance sheet.
You can use American Eagle Outfitters financial leverage analysis tool to get a better grip on understanding its financial position

How important is American Eagle's Liquidity

American Eagle financial leverage refers to using borrowed capital as a funding source to finance American Eagle Outfitters ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. American Eagle financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Please check the breakdown between American Eagle's total debt and its cash.

What do experts say?

Stock analysis is a method for investors and traders to make buying and selling decisions. By studying and evaluating past and current data, investors and traders attempt to gain an edge in the markets by making informed decisions. It is good to see analyst projects for American Eagle, but it might be worth checking our own buy vs. sell analysis

Exercise or conversion by Charles Kessler of 90749 shares of American Eagle subject to Rule 16b-3

Legal trades by American Eagle insiders are very common, as founders, directors, or employees of any publicly traded firm often have stock or stock options. These trades are made public in the United States through the filing of Form 4 of the Securities and Exchange Commission. Below entry was recorded recently and is publicly available as an insider trade:
American insider trading alert for exercise of stock option - right to buy by Charles Kessler, Global Brand President-AE, on 28th of December 2020. This event was filed by American Eagle Outfitters with SEC on 2020-12-28. Statement of changes in beneficial ownership - SEC Form 4. Charles Kessler currently serves as global brand president of american eagle outfitters of American Eagle Outfi [view details]   
Note, although insider trading is legal, in the United States, Canada, Australia, and Germany, for mandatory reporting purposes, corporate insiders are defined as a company's officers, directors, and any beneficial owners of more than 10% of a class of the company's equity securities.

Breaking down the case for American Eagle

The latest bullish price patterns experienced by current American Eagle Outfi shareholders could raise concerns from institutional investors as the firm it trading at a share price of 13.20 on slow start in volume. The company executives have been very successful in rebalancing the firm assets at opportune times to take advantage of market volatility in August. The stock standard deviation of daily returns for 30 days investing horizon is currently 3.67. The above-average risk is mostly attributed to market volatility and speculations regarding some of the upcoming earning calls from American Eagle partners.

Liabilities Breakdown

637.3 M
Current Liabilities
751.1 M
Long-Term Liabilities
Total Liabilities1.39 Billion
Current Liabilities637.29 Million
Long-Term Liabilities751.13 Million
Tax Liabilities27.94 Million

Our perspective of the latest American Eagle rise

Latest Jensen Alpha is up to 0.06. Price may slide again. As of the 9th of September, American Eagle shows the risk adjusted performance of 0.0423, and Mean Deviation of 3.15. American Eagle Outfi technical analysis gives you the methodology to make use of historical prices and volume patterns to determine a pattern that approximates the direction of the firm's future prices. Put another way, you can use this information to find out if the firm will indeed mirror its model of historical prices and volume momentum, or the prices will eventually revert. We were able to collect and analyze data for nineteen technical drivers for American Eagle Outfitters, which can be compared to its rivals. Please confirm American Eagle Outfi jensen alpha, and the relationship between the coefficient of variation and potential upside to decide if American Eagle Outfi is priced correctly, providing market reflects its regular price of 13.2 per share. Given that American Eagle has jensen alpha of 0.0551, we suggest you to validate American Eagle Outfitters's prevailing market performance to make sure the company can sustain itself at a future point.

Our Final Take On American Eagle

Whereas few other entities within the apparel retail industry are still a little expensive, even after the recent corrections, American Eagle may offer a potential longer-term growth to institutional investors. To conclude, as of the 9th of September 2020, our up-to-date 30 days buy-or-sell advice on the company is Cautious Hold. We believe American Eagle is overvalued with low probability of distress for the next two years.

About Contributor

This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Gabriel Shpitalnik do not own shares of American Eagle Outfitters. Please refer to our Terms of Use for any information regarding our disclosure principles.

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