November 30, 2011

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Gonna Fly Now?

American Eagle Oufitters (AEO,$AEO) Posts Great Results, ValuEngine Models Not Impressed
American Eagle Outfitters is a specialty retailer of all-American casual apparel, accessories, and footwear for men and women between the ages of 16 and 34. The company sources, designs, and markets a versatile line of timeless and relaxed clothing classics like jeans, khakis, and T-shirts under its American Eagle Outfitters and AE brand names for exclusive sale in its stores. The company is focused on several core brand and merchandising strategies to differentiate the company from competition, improve profitability and increase sales. American Eagle posted strong results for q3 and saw an earnings increase of almost 60%. Profit increased substantially to $52 million--$0.27/share vs last year's figure of $33 million--$0.17/share. In light of the stronger showing in q3, the company projected even better results for q4 with estimates ranging between $0.40-44/share. ValuEngine has issued a HOLD recommendation for AMER EAGLE OUTF on Nov. 30, 2011. Based on the information we have gathered and our resulting research, we feel that AMER EAGLE OUTF has the probability to ROUGHLY MATCH average market performance for the next year. The company exhibits ATTRACTIVE company size and volatility, but UNATTRACTIVE market valuation and expected EPS growth.

Based on available data as of Nov. 30, 2011, we believe that AEO should be trading at $13.03. This makes AEO 3.06% overvalued. Fair Value indicates what we believe the stock should be trading at today if the stock market were perfectly efficient and everything traded at its true worth. For AEO, we base this on actual earnings per share (EPS) for the previous four quarters of $0.91, forecasted EPS for the next four quarters of $0.92, and correlations to the 30- year Treasury bond yield of 2.96%.

ValuEngine Forecast Target Price*

1-Month 3-Month 6-Month 1-Year 2-Year 3-Year 13.51 13.49 13.53 13.53 13.04 12.56

Expected Return
0.57% 0.45% 0.72% 0.74% -2.91% -6.51%

Valuation & Rankings

Valuation 1-M Forecast Return 12-M Return Sharpe Ratio 5-Y Avg Annual Return Volatility Expected EPS Growth Market Cap (billions) Trailing P/E Ratio Forward P/E Ratio PEG Ratio Price/Sales Market/Book Beta Alpha 3.06% overvalued 0.57% -14.35% -0.42 -16.15% 38.10% 1.77% 2.62 14.81 14.55 8.35 0.89 1.99 1.02 -0.15 Valuation Rank 1-M Forecast Return Rank Momentum Rank Sharpe Ratio Rank 5-Y Avg Annual Rtn Rank Volatility Rank EPS Growth Rank Size Rank Trailing P/E Rank Forward P/E Ratio Rank PEG Ratio Rank Price/Sales Rank Market/Book Rank Beta Rank Alpha Rank 14 43 42 25 34 73 21 80 58 34 3 59 44 57 44

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MARKET OVERVIEW
Summary of VE Stock Universe
Stocks Undervalued Stocks Overvalued Stocks Undervalued by 20% Stocks Overvalued by 20% 84.22% 15.78% 52.06% 5.36%

SECTOR OVERVIEW
Sector
Aerospace Auto-Tires-Trucks Basic Materials Business Services Computer and Technology Construction Consumer Discretionary Consumer Staples Finance Industrial Products Medical Multi-Sector Conglomerates Oils-Energy Retail-Wholesale Transportation Utilities

Change
-1.17% -1.22% -0.05% -1.00% -0.41% -0.35% -0.43% -0.08% -0.34% -0.19% -0.15% 0.35% 0.07% -0.15% -0.13% 0.52%

MTD
-1.39% -7.80% -5.69% 3.02% -3.44% -0.29% -3.16% -3.73% -2.55% -2.45% -2.20% -3.81% -3.56% -2.79% -4.28% -1.70%

YTD
3.12% -34.56% -24.45% -6.54% -10.75% -24.83% -14.89% -16.44% -11.85% -16.80% -7.17% -16.25% -19.99% -5.20% -17.80% 3.65%

Valuation
20.25% undervalued 26.19% undervalued 25.02% undervalued 21.36% undervalued 22.73% undervalued 27.88% undervalued 21.33% undervalued 15.59% undervalued 21.20% undervalued 19.02% undervalued 27.03% undervalued 17.54% undervalued 21.74% undervalued 16.50% undervalued 21.05% undervalued 10.21% undervalued

Last 12MReturn
-0.03% -4.82% -13.91% -1.87% -2.14% -15.78% -8.21% -6.96% -7.79% -5.30% -4.60% -6.83% -3.19% 4.14% 0.04% 0.44%

P/E Ratio
17.32 20.95 26.02 21.46 33.55 32.07 29.75 17.25 18.02 20.09 25.56 20.82 31.85 22.85 24.99 20.13