This board has been migrated to our new platform! Check out the new home page at discussion.fool.com or click below to go directly to the new Board on the new site.
Post 469 explains why I bought American Eagle a few weeks back. I estimate its intrinsic value at $33 a share, based on the following assumptions: GAAP earnings: $330M (trailing 12 months, per Reuters) Earnings growth: Years 1-5: 7% Years 6-10: 5% Years 11-20: 4% Terminal: 3% Discount rate: 10% (high-quality earnings, net cash balance sheet, insider ownership) Share dilution: 3% a year (same as 2000-2004) My maximum Buy price is 75% of intrinsic value, or $25. If the stock hits 115% of intrinsic value, or $38, then I will sell. Although Yahoo Finance says American Eagle will grow 15% a year for the next five years, this seems aggressive since management is debuting a new and unproven store concept. If the Martin + Osa retail chain disappoints, then management will be distracted from its core American Eagle concept, which puts sales growth and margins at risk. If earnings do grow 15% a year for the next five years, then American Eagles intrinsic value is $44 a share. Hewittlong AEOS
Best Of |
Favorites & Replies |
My Fool |