Will investors benefit from the quality and dynamism of American Eagle Outfitters Inc?
the American Eagle Outfitters Inc (NYQ: OEA) the share price is currently trading at $ 33.7. But to predict what the price will look like over the next 12 months and beyond, it’s worth knowing its potential strengths and weaknesses. The encouraging news for shareholders is that it potentially compares well with some important financial and technical metrics …
Quality and momentum are highly sought after by investors looking for reliable investment ideas. This is because good quality stocks tend to be resilient, cash-generating businesses that can increase returns on investment over time. And research suggests that positive price and earnings trends can often persist.
To understand why quality and momentum are so important in an action like American Eagle Outfitters Inc, here’s a close-up view:
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Why quality matters …
When it comes to analyzing stocks, the quality of the company tends to be revealed by high profitability and strong industry margins. These types of businesses are stable, growing, and often have accelerating sales and profits. They also have a strong and improving financial history, with no obvious signs of accounting risk or bankruptcy.
One of American Eagle Outfitters Inc’s quality indicators is its 5-year return on capital employed, which is 14.2%. Long-term double-digit ROCEs can be a hallmark of companies with the power to grow very profitably.
… and why the momentum is so powerful
Positive trends are evident in stock prices and earnings growth. You can find clues in stocks that are trading near their 52-week highs and outperforming the market. They will often outperform brokers’ estimates and get forecast updates and recommendation changes.
There are signs of this at American Eagle Outfitters Inc, where the stock price has returned 100.0% against the market over the past 12 months. Market volatility and economic uncertainty can be a major drag on momentum, but previously strong stocks can recover quickly when confidence returns.
In summary, a combination of high quality and momentum can be a clue in finding stocks with the potential to generate solid investment earnings over many years.
In good times, these stocks can become expensive to buy. But in volatile markets, there may be chances of buying them at lower prices.
What does this mean for potential investors?
Finding good quality stocks with strong momentum behind them is a strategy used by some of the most successful investors in the world. But beware: these factors do not guarantee future returns and we have identified some areas of concern with American Eagle Outfitters Inc which you can find out here.
Alternatively, if you want to find more stocks that show signs of high quality and momentum, just come and take a look at this High Quality and Momentum screen.