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Profits Are Still Slim at Abercrombie & Fitch — So Why Are Insiders Buying?

Earlier this month, with a stock down nearly 50% over the past year, the CEO of Aeropostale (NYSE:ARO) made the bold decision to scoop up tens of thousands of his own company’s shares at bargain basement prices. Last week, an insider at one of Aeropostale’s main competitors made a similar decision.

According to filings just published by the SEC, on June 22, Director Craig Stapleton of ARO rival Abercrombie & Fitch (NYSE:ANF) acquired 10,000 shares of A&F at an average price of $22.42 per share. Today, these same shares that you can buy, too, are selling for… nearly $1 cheaper than what he paid.

What does it mean to you?
Like Aeropostale, Abercrombie & Fitch stock has been battered in recent months, its share price down 49% in the past 52 weeks. Unlike Aero, though, A&F is a company that’s currently earning profits.

Meager profits, no doubt. Over the past 12 months, Yahoo! Finance reports that A&F, a $1.5 billion company, has earned just $12.2 million in net income. But even so, that’s enough to put the company in positive territory. And with a projected earnings growth rate of 18%, A&F’s latest forward P/E ratio of 21.4 doesn’t look too expensive at all — especially once you factor in the company’s generous 3.4% dividend yield.

In fact, factor in the fact that A&F currently boasts strong free cash flow of $92 million annually, and the stock’s price-to-free cash flow ratio of just 16.3 looks downright attractive. In short, if insiders are beginning to buy back into Abercrombie & Fitch, there just might be a good reason for that.

The fact that you can now pick up these same shares, and at a price lower than what these insiders are paying, is just icing on the cake.

 

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