Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 3 stocks made the list for top value stocks in the Retailers - Apparel & Accessories industry. Those looking for value stocks to add to their portfolio may want to use this list as a starting point for further investment research.

Why Focus on Undervalued Retailers - Apparel & Accessories Stocks?

Value investors seek to buy stocks at a discount to their intrinsic value. Long-term returns show that such strategies are advantageous. Value stocks, as a group, tend to outperform growth stocks over extended periods of time. Typically, value investors perform financial analysis of numerous metrics, don’t follow the herd and are long-term investors.

AAII’s A+ Investor Value Grade is derived from a stock’s Value Score. The Value Score is the percentile rank of the average of the percentile ranks of the price-to-sales ratio, price-earnings ratio, enterprise-value-to-EBITDA (EV/EBITDA) ratio, shareholder yield, price-to-book-value ratio and price-to-free-cash-flow ratio. The score is variable, meaning it can consider all six ratios or, should any of the six ratios not be valid, the remaining ratios that are valid. To be assigned a Value Score, stocks must have a valid (non-null) ratio and corresponding ranking for at least two of the six valuation ratios.

What Goes Into AAII’s Value Grade?

Stock evaluation requires access to huge amounts of data as well as the knowledge and time to sift through it all, make sense of financial ratios, read income statements and analyze recent stock movement. AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels, to help investors with that task.

AAII’s proprietary stock grades come with A+ Investor. These offer intuitive A–F grades for more than just value. It is possible for a stock to appear cheap based on one valuation metric but appear expensive on another. It is also possible for one valuation ratio to be associated with outperforming stocks during certain periods of time but not others. Some stocks may even have null values for certain metrics like the price-earnings ratio or the price-to-book ratio but not others. An example of this would be a company with losses instead of profits or a negative book value because of heavy borrowing. Negative earnings or book value result in non-meaningful ratios that are left blank or null.

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3 Undervalued Retailers - Apparel & Accessories Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 3 undervalued stocks in the Retailers - Apparel & Accessories industry for Wednesday, July 24, 2024. Let’s take a closer look at their individual scores to see how they measure up against each other and the Retailers - Apparel & Accessories industry median.

The Value Grade is assigned based on how each stock’s composite valuation compares to all other stocks.

The process for assigning grades starts with each variable for a given stock. The percentile rankings for all valid ratios that a stock has are calculated. So, for instance, a stock could have a price-to-book ranking in the 43rd percentile, a price-earnings ranking in the 67th percentile, a price-to-sales ranking in the 23rd percentile, etc. Then, those rankings are averaged for each stock. (A minimum of two valid variables are required, though all six will be used if available.)

Once the average of the individual variables is calculated, that average is ranked against all stocks. Put another way, each stock’s composite valuation is compared to all other stocks. These ranks are then sorted into quintiles from the cheapest 20% (a grade of A) to the most expensive 20% (a grade of F).

As always, we recommend that you conduct proper due diligence and research before investing in any security. We also suggest that investors utilize numerous grades, not just value, when it comes to deciding whether a company is a good fit for their allocation needs.

American Eagle Outfitters Inc’s Value Grade

Value Grade:

American Eagle Outfitters, Inc. is a global specialty retailer. The Company offers clothing, accessories and personal care products under its American Eagle and Aerie brands. The Company operates through two segments: American Eagle and Aerie. American Eagle is an American jeans and apparel brand. Aerie is a lifestyle brand offering intimates, apparel, activewear, and swim collections. OFFLINE by Aerie offers a complete collection of activewear and accessories. The Company sells its products directly to consumers through its retail channel, which includes its stores and concession-based shops-within-shops. It operates stores in the United States, Canada, Mexico, and Hong Kong. The Company has license agreements with third parties to operate American Eagle and Aerie stores and online marketplace businesses throughout Asia, including India, Europe, Latin America, and the Middle East. The Company also operates Todd Snyder New York (Todd Snyder), a premium menswear brand.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

American Eagle Outfitters Inc has a Value Score of 65, which is considered to be undervalued.

When you look at American Eagle Outfitters Inc’s price-to-sales ratio at 0.79 compared to the industry median at 0.50, this company has a higher price relative to revenue compared to its peers. This could make American Eagle Outfitters Inc’s stock less attractive for value investors.

American Eagle Outfitters Inc’s price-earnings ratio is 19.52 compared to the industry median at 13.58. This means it has a higher share price relative to earnings compared to its peers. This could make American Eagle Outfitters Inc less attractive for value investors.

Now, let’s assess American Eagle Outfitters Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 6.7, when compared to the industry median of 7.9, the company may be considered undervalued in relation to its peers. Value investors could use the enterprise multiple to identify stocks that are considered overvalued or undervalued relative to their industry.

Shareholder yield is the sum of a stock’s dividend yield (paid over previous 12 months minus special dividends) and the percentage of net share buybacks over the previous 12 months. American Eagle Outfitters Inc’s shareholder yield is lower than its industry median ratio of 1.42%. Value investors may look for an attractive shareholder yield because it can be a powerful tool for identifying if the company has a good management team.

As one of the most common value metrics, the price-to-book ratio evaluates a company’s current market price relative to its book value. American Eagle Outfitters Inc’s price-to-book ratio is higher than its industry median ratio of 2.17. This could make American Eagle Outfitters Inc less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at American Eagle Outfitters Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. American Eagle Outfitters Inc’s price-to-free-cash-flow ratio is higher than its industry median ratio of 12.39. This could make American Eagle Outfitters Inc less attractive because the higher P/FCF ratio indicates that American Eagle Outfitters Inc is undervalued. The P/FCF ratio metric can also be viewed over a long-term time frame to see if the company's cash flow to share price value is generally improving or worsening.

Academy Sports and Outdoors Inc’s Value Grade

Value Grade:

Academy Sports and Outdoors, Inc. is a full-line sporting goods and outdoor recreation retailer in the United States. The Company's product assortment is focused on key categories of outdoor, apparel, sports and recreation, and footwear through both national brands and a portfolio of 19 private label brands. It has preferred access to national brands, such as Nike, Under Armour, adidas, Winchester, Columbia Sportswear, Brooks, Skechers, Yeti and Carhartt. Its private label brand portfolio consists of Academy Sports + Outdoors, Magellan Outdoors, BCG, O'rageous, Game Winner, Outdoor Gourmet, Freely and R.O.W. Its primary product types include coolers and drinkware, camping accessories and camping equipment; fitness equipment, fitness accessories and nutrition supplies; outdoor apparel, seasonal apparel, denim, work apparel, graphic t-shirts and accessories; casual shoes, slippers, seasonal footwear, socks; boys and girls footwear, and work and western boots, shoes and hunting footwear.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Academy Sports and Outdoors Inc has a Value Score of 89, which is considered to be undervalued.

Academy Sports and Outdoors Inc’s price-earnings ratio is 8.4 compared to the industry median at 13.6. This means that it has a lower price relative to its earnings compared to its peers. This makes Academy Sports and Outdoors Inc more attractive for value investors.

Academy Sports and Outdoors Inc’s price-to-book ratio is higher than its peers. This could make Academy Sports and Outdoors Inc less attractive for value investors when compared to the industry median at 2.17.

You can read more about Academy Sports and Outdoors Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Gap Inc’s Value Grade

Value Grade:

The Gap, Inc. is a specialty apparel company in America. The Company offers apparel, accessories and personal care products for women, men and children. Its Old Navy, Gap, Banana Republic, and Athleta brands offer clothing, accessories and lifestyle products for men, women and children. It is an omni-channel retailer, with sales to customers both in stores and online, through Company-operated and franchise stores, websites, and third-party arrangements. Its omni-channel services, including buying online pick-up in store, order-in-store, find-in-store, and ship-from-store, as well as enhanced mobile-enabled experiences, are tailored across its collection of brands. Gap includes adult apparel and accessories, GapKids, babyGap, Gap Maternity, GapBody, and GapFit collections. Banana Republic is a premium lifestyle retailer celebrating exploration and self-expression through timeless quality, versatile fabrics, and exceptionally made womenswear, menswear, and home designs.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Gap Inc has a Value Score of 72, which is considered to be undervalued.

Gap Inc’s price-earnings ratio is 12.3 compared to the industry median at 13.6. This means that it has a lower price relative to its earnings compared to its peers. This makes Gap Inc more attractive for value investors.

Gap Inc’s price-to-book ratio is lower than its peers. This could make Gap Inc more attractive for value investors when compared to the industry median at 2.17.

You can read more about Gap Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Other Retailers - Apparel & Accessories Stock Grades

Value is just one of the five Stock Grades included in our A+ Investor service. AAII members can see the top-graded stocks—those with grades of A or B for value, growth, momentum, earnings estimate revisions and quality—on the A+ Stock Grades Screener.

Also, if you want full access to all of AAII’s premium services, you can subscribe to one convenient bundled plan called AAII Platinum where you can try out A+ Investor, AAII Dividend Investing, the Stock Superstars Report, Growth Investing and VMQ Stocks. With the other premium services, you can dive deep into additional metrics, portfolios, commentary and information about Retailers - Apparel & Accessories stocks as well as other industrys.

Choosing Which of the 3 Best Retailers - Apparel & Accessories Stocks Is Right for You

Choosing which value stocks to invest in will ultimately depend on your individual goals and allocation; however, comparing similar value stocks in the same industry can help you analyze which might be better investments for you in the long run. So, let’s take a look at the Value Grade for all of our stocks.

• American Eagle Outfitters Inc stock has a Value Grade of B.
• Academy Sports and Outdoors Inc stock has a Value Grade of A.
• Gap Inc stock has a Value Grade of B.

Now that you have a bit more background about each of the 3 undervalued stocks in the Retailers - Apparel & Accessories industry as well as their overall grades, it’s time for you to conduct additional research to see if these could fit your portfolio needs based on your goals and risk tolerance. AAII can help you figure out both and identify which investments align with what works best for you.

We do so through a program of education that teaches you to invest for yourself and become an effective manager of your own wealth—no more relying on others for your financial independence. You can rely on AAII for timeless articles on financial planning and stock-picking, unbiased research and actionable analysis that makes you a better investor.

A+ Investor adds to that qualitative teaching by giving you a powerful data suite that helps you whittle down investment decisions to find stocks, exchange-traded funds (ETFs) or mutual funds that meet your needs.

Additional Resources About Retailers - Apparel & Accessories Stocks

Want to learn more about Retailers - Apparel & Accessories stocks to see if they could be the right investment for you? Check out some additional resources and articles to help you on your financial journey.

• 3 Undervalued Retailers - Apparel & Accessories Stocks for Wednesday, July 24
• 3 Undervalued Retailers - Apparel & Accessories Stocks for Tuesday, July 23
• Why Shoe Carnival Inc’s (SCVL) Stock Is Up 4.25%
• 3 Undervalued Retailers - Apparel & Accessories Stocks for Monday, July 22

AAII Disclaimer

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