Why American Eagle Outfitters, Inc. (NYSE:AEO) Could Be Worth Watching

American Eagle Outfitters, Inc. (NYSE:AEO), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$14.80 at one point, and dropping to the lows of US$10.63. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether American Eagle Outfitters' current trading price of US$10.83 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at American Eagle Outfitters’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for American Eagle Outfitters

What Is American Eagle Outfitters Worth?

Great news for investors – American Eagle Outfitters is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is $13.82, but it is currently trading at US$10.83 on the share market, meaning that there is still an opportunity to buy now. However, given that American Eagle Outfitters’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from American Eagle Outfitters?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to more than double over the next couple of years, the future seems bright for American Eagle Outfitters. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? Since AEO is currently undervalued, it may be a great time to increase your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on AEO for a while, now might be the time to make a leap. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy AEO. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

So while earnings quality is important, it's equally important to consider the risks facing American Eagle Outfitters at this point in time. In terms of investment risks, we've identified 4 warning signs with American Eagle Outfitters, and understanding them should be part of your investment process.

If you are no longer interested in American Eagle Outfitters, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.