Abercrombie & Fitch Co. (ANF): A Bull Case Theory

We came across a bullish thesis on Abercrombie & Fitch Co. (ANF) on Value Investing Subreddit Page by LocoJorge7. In this article, we will summarize the bulls’ thesis on ANF. Abercrombie & Fitch Co. (ANF)’s share was trading at $82.35 as of March 20^th. ANF’s trailing and forward P/E were 7.70 and 7.32 respectively according to Yahoo Finance.

A woman showing off her new dress in the changing room at an apparel store.

Abercrombie & Fitch (ANF) is an overlooked retail turnaround story, trading at just 7.4x P/E despite delivering 14% comparable sales growth. The market’s mispricing is evident in its valuation metrics, with an intrinsic value estimate of $107.5, making it 34.9% undervalued. With an EV/Sales of 0.9x, EV/EBIT of 8.7x, and a PEG ratio of 0.1x, the company is being priced as if it has little to no growth, even as its free cash flow yield stands at a solid 6.6%. ANF is no longer the struggling brand of the past. It has successfully transitioned away from its logo-heavy image, streamlined its store footprint, and expanded e-commerce penetration from 13% to nearly half of its total sales. Despite the retail sector’s inherent risks, including shifting fashion trends and economic downturns, the current valuation implies only 8.4% FCF growth, a stark contrast to its demonstrated performance. Even using conservative valuation models, the stock remains significantly mispriced. While a Peter Lynch-style valuation suggests a fair value as high as $337, even a fraction of that upside underscores how asymmetric this opportunity is. At this price, investors are getting a revitalized business with strong fundamentals at a distressed valuation.

Abercrombie & Fitch Co. (ANF) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 51 hedge fund portfolios held ANF at the end of the fourth quarter which was 51 in the previous quarter. While we acknowledge the risk and potential of ANF as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ANF but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.