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Is Abercrombie Fitch overvalued?

November 26, 2024  By Ellen Johnson
Macroaxis Story
Considering Abercrombie & Fitch's position in the Apparel Retail industry, the company's ability to maintain its bullish momentum in December may hinge on its impressive Return on Equity of 50.93%. With selling and marketing expenses reaching 217.3M, the brand's strategic investments in consumer engagement could play a pivotal role in sustaining its market performance.

Major Takeaways

Abercrombie & Fitch currently has a performance score of 5 out of 100. With a Beta of 1.52, the stock is more volatile than the overall market, indicating higher risk. This means the stock could see higher gains when the market is up, but it may also suffer greater losses during downturns. For a deeper analysis, consider reviewing Abercrombie & Fitch's potential upside, day median price, and the connection between its Treynor Ratio and accumulation distribution. These metrics can help you decide if the stock's price trends are likely to reverse.
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Reviewed by Rifka Kats

Fashion fades, but style is eternal. Abercrombie & Fitch, a staple in the apparel retail industry, has been making waves on the New York Stock Exchange under the ticker ANF. As we edge closer to December, investors are keenly observing whether this iconic brand can maintain its upward trajectory. With a market capitalization of $7.9 billion and a strong operating income of $484.7 million, Abercrombie & Fitch is well-positioned in the consumer cyclical sector. The company's specialty in retail has allowed it to carve out a significant niche, reflected in its impressive enterprise value of $8 billion. As analysts set a high target price of $211.82, the consensus leans towards a buy, sparking curiosity about whether the brand's momentum will continue through the holiday season. Abercrombie & Fitch's Payables Turnover is expected to decline in the coming years. Meanwhile, its Capex to Revenue ratio is predicted to rise to 0.05, and the Price to Sales Ratio is likely to fall to 0.49. While some investors may be overanalyzing the specialty retail sector, focusing on Abercrombie & Fitch could be worthwhile. Let's explore why there's still optimism for a potential recovery. I'll also discuss key factors influencing Abercrombie & Fitch's products and how these might affect the company's outlook for active traders this year.
The performance of Abercrombie Fitch in the marketplace will significantly impact your decision to invest in its stock. Revenue growth, profitability, competitive positioning, management quality, and industry trends can influence Abercrombie Fitch's stock prices. When investing in Abercrombie Fitch, there are several factors to consider and potential outcomes to expect. As a company performs well, its stock price may increase, allowing investors to benefit from price appreciation. However, Abercrombie Stock can experience significant price fluctuations due to market conditions, economic factors, industry trends, or company-specific news. This is why investing in stocks such as Abercrombie Fitch carries risks, including the potential for capital loss. Stock prices can decline, and investors may incur losses if they sell shares at a lower price than their initial investment.

How important is Abercrombie Fitch's Liquidity

Abercrombie Fitch financial leverage refers to using borrowed capital as a funding source to finance Abercrombie Fitch ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Abercrombie Fitch financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to Abercrombie Fitch's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Abercrombie Fitch's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between Abercrombie Fitch's total debt and its cash.

What do experts say?

Stock analysis is a method for investors and traders to make buying and selling decisions. By studying and evaluating past and current data, investors and traders attempt to gain an edge in the markets by making informed decisions. It is good to see analyst projects for Abercrombie Fitch, but it might be worth checking our own buy vs. sell analysis

Abercrombie Fitch Gross Profit

Abercrombie Fitch Gross Profit growth is one of the most critical measures in evaluating the company. The Gross Profit growth rate is calculated simply by comparing Abercrombie Fitch previous period's values with its current period's values. Each time period you're measuring should be of equal lengths the increase or decrease, in a company's Gross Profit between two periods. Here we show Abercrombie Fitch Gross Profit growth over the last 10 years. Please check Abercrombie Fitch's gross profit and other fundamental indicators for more details.

Breaking it down a bit more

The asset utilization indicator refers to the revenue earned for every dollar of assets a company currently reports. Abercrombie Fitch has an asset utilization ratio of 143.93 percent. This implies that the Company is making $1.44 for each dollar of assets. An increasing asset utilization means that Abercrombie Fitch is more efficient with each dollar of assets it utilizes for everyday operations.
Success usually comes to those who are too busy to be looking for it, said Henry David Thoreau, and Abercrombie & Fitch seems to embody this spirit as it rides a wave of bullish momentum. With a robust quarterly earnings growth of 127.3%, the company is demonstrating strong financial health in the competitive apparel retail industry. Despite a net interest income loss of 372K, Abercrombie & Fitch's operating income of 484.7M and a return on equity of 51% highlight its operational efficiency and profitability. As December approaches, investors are keenly watching whether the company can maintain its upward trajectory, especially with an EPS estimate of 6.56 for the next year. With 98.09% of shares owned by institutions, confidence in the stock remains high, suggesting that Abercrombie & Fitch might just continue its successful streak..

Possible December relapse of Abercrombie?

Abercrombie & Fitch's stock currently shows a skewness of -1.11, indicating a potential lean towards negative returns. This means the stock's distribution has a longer tail on the left, suggesting a possible downturn. As December approaches, investors should be cautious about a potential dip in the stock's performance. While skewness isn't a definitive predictor, it serves as a warning, particularly for short-term investors. Monitoring market trends and company updates will be essential to manage any upcoming volatility.
Abercrombie & Fitch also displays low volatility, with a skewness of -1.11 and kurtosis of 5.66. Understanding these volatility trends can help investors time their market moves. High volatility in bear markets can affect the stock price, prompting investors to adjust their portfolios as prices drop.As we look towards December, Abercrombie & Fitch's stock presents an intriguing opportunity for investors. With an analyst target price estimated at 190.83 and a strong consensus leaning towards a "Buy," the potential for continued growth is evident. While the stock has shown volatility, the market's confidence is underscored by the highest estimated target price reaching 211.82. For those considering adding ANF to their portfolio, the combination of robust earnings projections and positive analyst sentiment suggests that the stock could indeed continue its upward trajectory, making it a compelling option for investors seeking growth in the retail sector..

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Editorial Staff

Ellen Johnson is a Member of Macroaxis Editorial Board. Ellen covers public companies in North America, focusing primarily on valuation and volatility. Six years of experience in predictive investment analytics and risk management. View Profile
This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Ellen Johnson do not own shares of Abercrombie Fitch. Please refer to our Terms of Use for any information regarding our disclosure principles.

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