Washboard Abs & Profits to Match: Is It Time to Invest In These Apparel Stocks? – The Gap Inc. (GPS), American Eagle Outfitters (AEO), Abercrombie & Fitch Co. (ANF)

Page 1 of 2

With public nudity banned in San Francisco, the long spell of terror we clothed masses have endured is over. Once again, we can wear clothing without fear, which means that clothing stocks are due to jump, right?

Several major apparel retailers have in fact seen their stocks rise over the past year. For some, that has meant coming out of a slump. For others, it may mean some investors have missed the boat on a quick profit. Before we jump to any conclusions, though, let’s take a closer look at these ‘casual apparel’ retailers and see what they have to offer beneath the washboard abs and cloud of cheap cologne.

Abercrombie & Fitch Co. (NYSE:ANF)Grab your money and watch

Full disclosure: I hate Abercrombie & Fitch Co. (NYSE:ANF) . Well, the image they project. But we can’t argue with their position: with a middling market cap of $3.8 billion, and hovering 12% below its 52-week high, this might be a good time to get in on this staple of middle America malls.

Abercrombie & Fitch Co. (NYSE:ANF) has increased sales by 17% on average over the past four quarters, and though the cost of sales has outpaced that number at a concomitant 19.5% over the same period, gross operating profits have nevertheless seen a 16% average increase over the past year, an impressive number considering the size of the company.

Part of Abercrombie’s success can be lain at the feet of a declining current ratio and a subsequently high rate of debt. Though a current ratio of 1.6 isn’t the end, the fact that it has been in decline for well over a year is cause for concern. With a PEG of 0.73, the stock remains a ‘maybe’: if it stops putting up profits as it has been, we may find the PEG evening out at a solid 1 pretty quickly.

Doing about as well as its namesake

American Eagle Outfitters (NYSE:AEO) is a close second to Abercrombie & Fitch Co. (NYSE:ANF), with a market cap of $4.0 billion. Sales have declined 12% since the start of the year, though since then they have increased by an average of 13% per quarter, with cost of sales lagging behind at an admirable 9.2% per quarter in the same period. American Eagle Outfitters (NYSE:AEO is, in other words, recovering steadily.

The company’s current ratio is at a comparatively admirable 2.6; it has seen a decline since July of last year, but that’s to be expected in light of the stock’s drop last spring. What should give you pause is their forward PEG of 1.09. While they are managing a recovery, that only means they’re scrabbling their way back towards parity with previous levels of profitability. The stock remains evenly, if not overly, valued, and a bargain hunter would probably do well to stay away from it for the moment.

For the long-term investor, however, a dividend yield of 2.2% is considerable. As ever, make your investment decisions based on your own needs.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!