Has Abercrombie & Fitch Corrected Too Far After 49% Share Price Drop in 2025?

Are you eyeing Abercrombie & Fitch shares, wondering if now is the moment to buy, hold, or even consider a strategic exit? You are not alone. The brand that defined a generation of preppy style is making waves again, but this time, it is their stock that has everyone talking. After a wild ride over the past three years, which saw the share price jump an astonishing 404.4%, recent months brought a sharp correction. Shares are down 8.1% in the last week, dropped 18.3% over the past month, and have slid 49.2% year-to-date. Even so, those who got in five years ago are still sitting on gains of over 370.6%.

What is driving these swings? Market sentiment around specialty retailers has shifted quickly, influenced by changing consumer tastes, supply chain shifts, and the macroeconomic environment. Yet, despite the pullback, Abercrombie & Fitch stands out against its peers on valuation. It scores a 6 out of 6 on our value score, meaning it looks undervalued in all six major checks we run.

So, what are these valuation checks, and do they really give the full picture? Let’s walk through the methods analysts use to determine if Abercrombie & Fitch is truly a bargain, or if there is something even smarter investors should pay attention to as we dig deeper.

Why Abercrombie & Fitch is lagging behind its peers

Approach 1: Abercrombie & Fitch Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates the value of a company by projecting its future cash flows and discounting those amounts back to today's dollars. For Abercrombie & Fitch, the DCF method uses forecasts of the company’s Free Cash Flow (FCF) over the next several years to determine fair value.

Abercrombie & Fitch’s latest twelve-month Free Cash Flow stands at $352.9 million. Analyst projections show FCF growing through 2027, peaking at $523.0 million before declining to $312 million in 2028. Beyond that, further estimates are extrapolated and gradually increase, but at a slower rate. These cash flows are all measured in millions of US dollars.

After discounting all projected future cash flows back to the present, the DCF model calculates an intrinsic value per share of $103.82. This result suggests the stock is trading at an implied 25.0% discount to its fair value, making it notably undervalued compared to the market price.

In summary, the DCF model indicates that Abercrombie & Fitch is attractively priced relative to its expected future cash flows.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Abercrombie & Fitch.

Our Discounted Cash Flow (DCF) analysis suggests Abercrombie & Fitch is undervalued by 25.0%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Abercrombie & Fitch Price vs Earnings

The Price-to-Earnings (PE) ratio is often the preferred method for valuing profitable companies like Abercrombie & Fitch, as it helps investors gauge how much they are paying for each dollar of a company's earnings. The PE ratio is especially popular because it connects directly to profitability and is easy to compare across businesses in the same industry.

Typically, a company's fair or normal PE ratio is influenced by factors like expected earnings growth and perceived risk. If a company is expected to grow faster than its peers, investors may be willing to pay a higher multiple. Higher risks usually suppress that number. For Abercrombie & Fitch, the current PE ratio stands at 6.78x. That is substantially lower than the specialty retail industry average of 17.10x and below the peer average of 17.11x. This may signal the market is undervaluing its earnings.

Rather than just compare Abercrombie & Fitch to industry or peer averages, the Simply Wall St "Fair Ratio" offers a more thorough benchmark. This proprietary metric calculates the preferred multiple you would expect based on the company's own growth prospects, earnings power, profit margins, market capitalization and risk profile. For Abercrombie & Fitch, the Fair Ratio is set at 14.74x, which is more than double its current PE. This suggests the market is pricing the stock well below where it should be according to its financial and industry fundamentals.

Based on the Fair Ratio compared with the actual multiple, Abercrombie & Fitch appears materially undervalued on a PE basis.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Abercrombie & Fitch Narrative

Earlier, we mentioned there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is simply your story or perspective about a company, tying together what you think about its business, such as growth drivers, risks, and market shifts, with your own forecasts for future revenue, earnings, and margins. On Simply Wall St, Narratives make it easy to turn your view about Abercrombie & Fitch into a financial forecast, which then calculates a fair value you can compare to today’s share price.

Millions of investors are already using Narratives, available right on Simply Wall St’s Community page, to see the reasoning behind different price targets and buying decisions. What makes Narratives uniquely powerful is that they update in real time as new information, such as news or earnings releases, comes out, letting you easily adjust your outlook and choose a better moment to buy, hold, or sell.

For example, some investors see APAC expansion and strong digital engagement as fuel for long-term growth, leading them to set fair values as high as $145 per share. Others, more cautious about tariffs and declining profit margins, might target $84, demonstrating how Narratives help reflect a wide range of real-world investment views for Abercrombie & Fitch.

Do you think there's more to the story for Abercrombie & Fitch? Create your own Narrative to let the Community know!

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.

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