David Sable, a director at
American Eagle Outfitters (AEO), recently picked up 1,500 shares. The buy increased his stake by 6 percent, and came to a total price of just under $19,000.
This marks the second insider buy this year, also from a director. And a third director picked up shares late last year. Otherwise, company executives have been large and consistent sellers of shares over the past three years.
Overall, company insiders own about 6.3 percent of shares.
Shares of the apparel retailer are down about two-thirds over the past year. That’s come as the company has managed to grow the revenue, although by a modest 2 percent. While earnings have dropped, shares have gone from trading at 47 times earnings last year to just over 6 times forward earnings.
Action to take: Shares are trading at their cheapest valuation in years, and the company has sufficient cash flows to weather the current economic conditions. Today’s investors can get a 6 percent dividend yield. So far, the payout ratio is low enough that the payout can continue indefinitely, even if the company continues to grow at the low single-digit rate from here.
For traders, the steady downtrend in shares over the past year has moderated in recent weeks. The January 2023 $15 calls, last going for about $1.00, can potentially see high-double or low-triple-digit gains on a rally in shares in the latter half of the year.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.