With its stock down 50% over the past year and trading at a rock bottom valuation, small-cap %Clothing retailer %AmericanEagleOutfitters (NYSE: $AEO) looks to be on sale.
The Pennsylvania-based company’s stock is trading at $11.45 U.S. a share, having been cut in half over the last 12 months, including a 33% decline so far this year.
AEO stock is now trading at just six times this year’s earnings estimates, which is rock bottom and about as cheap as investors will find in the current market.
In addition to being undervalued, American Eagle’s stock also offers a chunky quarterly dividend that pays $0.13 U.S. a share, giving it a yield of 4.37%.
With a market capitalization of only $2.20 billion U.S., American Eagle Outfitters is a small-cap stock. However, it promises large future returns for patient long-term investors.
The company just reported its latest financial results, and they largely beat Wall Street’s expectations.
American Eagle announced earnings per share (EPS) of $0.54 U.S. for the fourth quarter of last year, which was ahead of consensus estimates that called for $0.50 U.S.
Revenue in the period totaled $1.60 billion U.S., which matched Wall Street’s expectations.
Unfortunately, American Eagle continues to issue cautious guidance, saying they are navigating an “uncertain consumer and operating landscape” at the present time.
For the current quarter, American Eagle said that it expects a mid-single-digit decline in sales. Analysts had expected revenue to increase 1.3% in the first three months of this year.
For all of 2025, the company is expecting sales to decline by a low single digit, compared with expectations for 3% growth.
Management said that tariffs are likely to impact its results this year, noting that the company sources about 20% of its products from China.
However, it should be noted that American Eagle isn’t the only retailer to warn about economic uncertainty and a slowdown in U.S. consumer spending.
In the past few weeks, retailers from Abercrombie & Fitch (ANF) to %DicksSportingGoods (NYSE: $DKS) have also lowered their guidance and warned about deteriorating macroeconomic conditions.
While the near-term might be challenging, American Eagle Outfitters offers long-term investors a cheap stock that pays a hefty dividend while they wait for a turnaround.
