3 Reasons Why Growing Investors Will Like American Eagle (AEO)

0
8

Investors are looking for growth stocks to take advantage of above-average financial growth, allowing these stocks to capture market attention and generate exceptional returns. But finding a stock of great growth is not easy at all.

By their nature, these stocks are exposed to above average risk and volatility. In addition, if the growth story of a company is about to end or stop, betting on it could lead to significant losses.

However, the task of finding state-of-the-art growth stocks is facilitated by using the Zacks growth style score (part of the Zacks style score system), which goes beyond traditional growth attributes to analyze a company's actual growth prospects.

American Eagle Outfitters (AEO) is one of those actions currently recommended by our exclusive system. The company not only has a favorable growth index, but also ranks higher in the Zacks ranking.

Research shows that stocks with the best growth characteristics consistently beat the market. And for stocks that combine a growth index of A or B and a rank of Zacks of rank 1 (strong buy) or 2 (buy), yields are even better.

While there are many reasons why the stock of this teen clothing retailer is an excellent choice right now, we have highlighted three of the most important factors below:

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Revenue growth"data-reactid =" 28 ">Revenue growth

It can be argued that nothing is more important than earnings growth, as most investors are looking for higher profit levels. For growing investors, double-digit earnings growth is highly preferable as it is often seen as an indication of a promising outlook (and stock price gains) for the company.

While the historical EPS growth rate for American Eagle is 21.4%, investors should focus on projected growth. The company's EPS is expected to grow by 11.5% this year, crushing the industry average, which assumes EPS growth of 8.9%.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Awesome asset utilization ratio"data-reactid =" 31 ">Awesome asset utilization ratio

The asset utilization ratio – also called the sales / total assets ratio (S / TA) – is often overlooked by investors, but it is an important indicator for growth investments. . This measure shows the efficiency with which a company uses its assets to generate sales.

At present, American Eagle has an S / TA ratio of 2.18, which means that the company achieves a turnover of 2.18 USD for every dollar of assets. Comparing this to the industry average of 1.88, we can say that the business is more efficient.

If the level of efficiency in sales generation is very important, so is the sales growth of a company. And American Eagle also looks attractive from the point of view of sales growth. The company's sales are expected to increase by 5.9% this year, compared with an industry average of 2.3%.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Promising revisions to the estimation of the results"data-reactid =" 35 ">Promising revisions to the estimation of the results

The superiority of a stock in terms of the parameters described above can be further validated by examining the trend of earnings estimates revisions. A positive trend is of course favorable here. Empirical research shows that there is a strong correlation between trends in revisions to earnings estimates and short-term stock price fluctuations.

Current year earnings estimates for American Eagle have been revised upward. The Zacks Consensus estimate for the current year has increased by 1.1% in the last month.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Bottom line"data-reactid =" 38 ">Bottom line

American Eagle has not only achieved a growth index of B based on a number of factors, including those described above, but also ranks Zacks 2 due to the positive revision of the earnings estimate .

You can see the complete list of # 1 Zacks stock at current rank (strong buy) here.

This combination positions American Eagle well for outperformance, so that growing investors may want to bet on it.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "
Do you want to know the latest Zacks Investment Research recommendations? Today, you can download 7 best actions for the next 30 days. Click to get this free report
& nbsp;
To read this article on Zacks.com, click here.
& nbsp;
Zacks Investment Research"data-reactid =" 42 ">
Do you want to know the latest Zacks Investment Research recommendations? Today, you can download 7 best actions for the next 30 days. Click to get this free report

To read this article on Zacks.com, click here.

Zacks Investment Research