Option FanaticOptions, stock, futures, and system trading, backtesting, money management, and much more!

ANF Stock Study (9-23-25)

Posted by on December 10, 2024 at 06:39 | Last modified: October 15, 2025 10:01

I recently did a stock study on Abercrombie & Fitch Co. (ANF, $87.77).

M* writes:

     > Abercrombie & Fitch Co is a specialty retailer that sells casual
     > clothing, personal-care products, and accessories for men, women,
     > and children. It sells direct to consumers through its stores
     > and websites, which include the Abercrombie & Fitch, Abercrombie
     > kids, and Hollister brands. Majority stores are in the United
     > States, but the company does have many stores in Canada,
     > Europe, and Asia. All stores are leased. Abercrombie ships to
     > well over 100 countries via its websites. The company sources
     > its merchandise from dozens of vendors that are located in Asia
     > and Central America. Abercrombie has two distribution centers
     > in Ohio to support its North American operations. It uses
     > third-party distributors for sales in Europe and Asia.

Over the past 10 years, this medium-size company has grown sales and earnings at annualized rates of 3.1% and 38.8%, respectively. Lines are generally up and parallel with sales and EPS down in ’17 (references to year from Value Line and BI website incremented by 1 to align with FY ending Jan 31), ’21 (huge drop to negative EPS, which could probably be excluded due to COVID), and ’23. Ten- (Five-) year EPS R^2 is 0.14 (0.35) and Value Line gives an Earnings Predictability score of 10. I think whether this passes visual inspection is debatable.

Over the past decade, PTPM trails peer and industry averages despite increasing from 1.6% (’16) to 15.5% (’25) with a last-5-year mean of 7.1%. ROE also trails peer and industry averages despite increasing from 2.7% (’16) to 43.2% (’25) with a last-5-year mean of 18.2%. Debt-to-Capital is less than the industry and about even with peers while increasing from 20.5% (’16) to 41.6% (’25) with a last-5-year mean of 55.5% (all rentals and leases as company has no long-term debt).

Value Line gives a B+ rating for Financial Strength. Quick Ratio is 0.75 but Interest Coverage is 323 per M* who assigns “Standard” for Capital Allocation (and suggests negatively that balance sheet may be too conservative)

With regard to sales growth:

My 3.0% forecast is at bottom of the range.

With regard to EPS growth:

My 1.0% per year forecast is just below the range of three long-term estimates (mean 4.7%). Initial value is 2026 Q2 EPS of $10.57/share rather than ’25 EPS of $10.69.

My Forecast High P/E is 14.0. Over the past decade, high P/E falls from 55.3 in ’16 to 18.4 in ’25 with a last-5-year mean of 15.7 (excluding NMF and 842 in ’21 and ’23, respectively) and a last-5-year-mean average P/E of 10.9. I am near bottom of the range (only 11.7 in ’22 is lower).

My Forecast Low P/E is 5.0. Over the past decade, low P/E falls from 30.2 in ’16 to 9.5 in ’25 with a last-5-year mean of 6.1 (excluding NMF and 285 in ’21 and ’23, respectively). I am forecasting near bottom of the range (only 3.5 in ’24 are lower).

My Low Stock Price Forecast (LSPF) of $52.90 is default based on initial value given above. This is 39.7% less than previous closing price and 19.1% less than the 52-week low.

These inputs land ANF in the HOLD zone with a U/D ratio of 1.9. Total Annualized Return (TAR) is 12.1%.

PAR (using Forecast Average—not High—P/E) of 3.8% is just under the risk-free rate (T-Bill). If a healthy margin of safety (MOS) anchors the study, then I can proceed based on TAR instead.

To assess MOS, I usually compare my inputs with those of Member Sentiment (MS) but only six total studies currently show on the website: too small a sample size for comparison.

Value Line’s projected average annual P/E (high EPS) of 10.5 ($12.25) is greater than my 9.5 ($11.11).

These observations along with my inputs near or below respective analyst/historical ranges lead me to believe MOS is robust in the current study.

In doing the study, my gut tells me not to use a Forecast Low P/E of 6.0, which would still be in the lower end of the range. Historical P/E distribution is very spotty, though, with 10 years including one NMF, two triple digits, 3.5, and 5.4. 3.5 seems excessively low for the industry and 5.4 is highly questionable. That leaves only five viable data points with one [maybe two] in the last five years. Not much to go on with high variability necessitates more conservative inputs. 6.0 rather than 5.0 makes for a more reasonable LSPF (closer to 30% less than previous close rather than 40%) and leaves the BUY zone just beneath ($86.40/share). Just too much uncertainty for me to do this, however.

I see several other weaknesses with ANF. EPS projections are very inconsistent with only three available ranging from 1.2% – 10.0%. Sales forecasts are weak. Visual inspection, as mentioned at the top, is choppy. Historical EPS distribution is very wide leading me to question the reliability of a higher initial value ($10.69 in ’25 is 72% YOY growth). Even the stock price is highly volatile falling 48% over the last year while zooming ~400% over the last three years. Quality stock prospects are all about stability; this is not that.

Per U/D, ANF is a BUY under $78.60. Given a forecast high price just under $156, BI TAR criterion is met ~ $78/share.

A 90-day free trial to BetterInvesting® may be secured here (also see link under “Pages” section at top right of this page).

Categories: BetterInvesting® | Comments (0) | Permalink