One Reason Why American Eagle Outfitters (AEO) Stock Is Climbing Today

NEW YORK (TheStreet) -- Shares of American Eagle Outfitters, Inc.  (AEO) are climbing 4.56% to $14.77 in late morning trading after CEO Jay Schottenstein bought 148,942 shares of the stock at $14.13 each, totaling $2.11 million yesterday.

This is Schottenstein's second buy, after the first purchase of $6.42 million in shares earlier this year for a cost of $12.84 each.

Separately, the retailer announced today its integrated initiative with non-profit organization, Bright Pink in support of Breast Cancer Awareness Month.

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TheStreet Ratings team rates AMERICAN EAGLE OUTFITTERS INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate AMERICAN EAGLE OUTFITTERS INC (AEO) a HOLD. The primary factors that have impacted our rating are mixed, some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • AEO has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.70 is somewhat weak and could be cause for future problems.
  • Net operating cash flow has increased to $33.98 million or 16.39% when compared to the same quarter last year. Despite an increase in cash flow, AMERICAN EAGLE OUTFITTERS INC's average is still marginally south of the industry average growth rate of 24.41%.
  • AEO, with its decline in revenue, slightly under performed the industry average of 0.0%. Since the same quarter one year prior, revenues slightly dropped by 2.3%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Specialty Retail industry and the overall market, AMERICAN EAGLE OUTFITTERS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for AMERICAN EAGLE OUTFITTERS INC is currently lower than what is desirable, coming in at 33.43%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.81% trails that of the industry average.
  • You can view the full analysis from the report here: AEO Ratings Report

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