American Eagle Outfitters (AEO) Is Weak On High Volume Today

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer.

Trade-Ideas LLC identified American Eagle Outfitters ( AEO) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified American Eagle Outfitters as such a stock due to the following factors:

  • AEO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $78.0 million.
  • AEO has traded 639,094 shares today.
  • AEO is trading at 4.39 times the normal volume for the stock at this time of day.
  • AEO is trading at a new low 3.02% below yesterday's close.

'Weak on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as material stock news, analyst downgrades, insider selling, selling from 'superinvestors,' or that hedge funds and traders are piling out of a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize (or avoid losses by trimming weak positions). In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on AEO:

American Eagle Outfitters, Inc. operates as a retailer of apparel and accessories in the United States and internationally. The stock currently has a dividend yield of 3.1%. AEO has a PE ratio of 35. Currently there are 11 analysts that rate American Eagle Outfitters a buy, 2 analysts rate it a sell, and 9 rate it a hold.

The average volume for American Eagle Outfitters has been 4.6 million shares per day over the past 30 days. American Eagle Outfitters has a market cap of $3.2 billion and is part of the services sector and retail industry. The stock has a beta of 0.98 and a short float of 13.6% with 4.94 days to cover. Shares are up 16.9% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates American Eagle Outfitters as a buy. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the ratings report include:
  • AMERN EAGLE OUTFITTERS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, AMERN EAGLE OUTFITTERS INC increased its bottom line by earning $0.46 versus $0.42 in the prior year. This year, the market expects an improvement in earnings ($0.88 versus $0.46).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Specialty Retail industry. The net income increased by 486.2% when compared to the same quarter one year prior, rising from $10.51 million to $61.61 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 12.1%. Since the same quarter one year prior, revenues slightly increased by 2.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 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. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.04, which illustrates the ability to avoid short-term cash problems.
  • Net operating cash flow has increased to $204.56 million or 30.60% when compared to the same quarter last year. In addition, AMERN EAGLE OUTFITTERS INC has also modestly surpassed the industry average cash flow growth rate of 20.86%.

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