American Apparel Inc. (APP): Is This Company’s Comeback Complete or Is it a Short Candidate?

Another apparel competitor focusing on younger consumers is American Eagle Outfitters (NYSE:AEO). The company has a market cap of $3.67 billion, along with a dividend yield of 2.6%, and a P/E ratio of 17.14. American Eagle Outfitters (NYSE:AEO)’s share price is down 7.12% year to date, and is trading below its 50-day and 200-day SMA. The company has reported declining revenues, with first quarter 2013 revenue decreasing 4% to $679 million, versus revenue of $709 million for the prior year quarter. American Eagle Outfitters (NYSE:AEO) has a monthly volatility of 2.39%, versus a monthly volatility of 4.08% for American Apparel, and is prone to less dramatic price swings.

American Apparel Inc. (NYSEMKT:APP) has experienced a dramatic fall due to problems with its business, as well as the negative press related to Charney. However, the share price has shown some signs of life more recently. The company has shown other positive signs as well, with losses narrowing and the completion of the favorable debt-financing. Ultimately, the company needs to achieve profitability in order to truly stabilize itself. Competitors likely offer more stable investments, but have less room for share price growth.

American Apparel Inc. (NYSEMKT:APP)’s share price has bounced off its 52-week high somewhat, and appears to be range-bound in the near-term. The low price of the stock tends to add to the instability of the share price. However, for those investors willing to take a gamble, there is the possibility of a substantial payoff. The concern is that it is difficult to gauge where the price is headed in the longer term. Until the company regularly turns a profit, it is still too early to declare its comeback a success.

The article Is This Company’s Comeback Complete or Is it a Short Candidate? originally appeared on Fool.com and is written by Mike Thiessen.

Mike Thiessen has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Mike is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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