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

10 Best States To Practice Medicine

The 10 Best States to Have a Business

The 12 Most Expensive Apple (AAPL) Apps in the Market

The 10 Richest Billionaires in the World

10 Biggest Kickstarter Failures

The 10 Best Places to Work At

The Top 10 of Google Inc (GOOGL)’s Most Expensive Acquisitions

13 Best Cities to Visit in South America

10 Most Expensive Works of Art of All Time

The 10 Richest Banks in the World

The 10 Best-Paying Jobs in America (2014)

7 Most Expensive Foods in the World

The World’s Top 10 Earning Authors

Five Wicked and Very Expensive Items (and Other “Stuff”) Sold on eBay

10 Biggest Celebrity Bankruptcies

The Top 10 Highest Paid CEOs in 2014

The 10 Most Expensive Real Estate Cities in America

10 Most Expensive States To Live In America

The 10 Best Airlines in the World

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

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!