6 Undervalued Retailers - Apparel & Accessories Stocks for Friday, May 31 (2024)

Value investors seek to buy stocks at a discount to their intrinsic value. Long-term returns show that such strategies are advantageous. Value stocks, as a group, tend to outperform growth stocks over extended periods of time. Typically, value investors perform financial analysis of numerous metrics, don’t follow the herd and are long-term investors.

AAII’s A+ Investor Value Grade is derived from a stock’s Value Score. The Value Score is the percentile rank of the average of the percentile ranks of the price-to-sales ratio, price-earnings ratio, enterprise-value-to-EBITDA (EV/EBITDA) ratio, shareholder yield, price-to-book-value ratio and price-to-free-cash-flow ratio. The score is variable, meaning it can consider all six ratios or, should any of the six ratios not be valid, the remaining ratios that are valid. To be assigned a Value Score, stocks must have a valid (non-null) ratio and corresponding ranking for at least two of the six valuation ratios.

Stock evaluation requires access to huge amounts of data as well as the knowledge and time to sift through it all, make sense of financial ratios, read income statements and analyze recent stock movement. AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels, to help investors with that task.

AAII’s proprietary stock grades come with A+ Investor. These offer intuitive A–F grades for more than just value. It is possible for a stock to appear cheap based on one valuation metric but appear expensive on another. It is also possible for one valuation ratio to be associated with outperforming stocks during certain periods of time but not others. Some stocks may even have null values for certain metrics like the price-earnings ratio or the price-to-book ratio but not others. An example of this would be a company with losses instead of profits or a negative book value because of heavy borrowing. Negative earnings or book value result in non-meaningful ratios that are left blank or null.

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Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 6 undervalued stocks in the Retailers - Apparel & Accessories industry for Friday, May 31, 2024. Let’s take a closer look at their individual scores to see how they measure up against each other and the Retailers - Apparel & Accessories industry median.

The Value Grade is assigned based on how each stock’s composite valuation compares to all other stocks.

The process for assigning grades starts with each variable for a given stock. The percentile rankings for all valid ratios that a stock has are calculated. So, for instance, a stock could have a price-to-book ranking in the 43rd percentile, a price-earnings ranking in the 67th percentile, a price-to-sales ranking in the 23rd percentile, etc. Then, those rankings are averaged for each stock. (A minimum of two valid variables are required, though all six will be used if available.)

Once the average of the individual variables is calculated, that average is ranked against all stocks. Put another way, each stock’s composite valuation is compared to all other stocks. These ranks are then sorted into quintiles from the cheapest 20% (a grade of A) to the most expensive 20% (a grade of F).

As always, we recommend that you conduct proper due diligence and research before investing in any security. We also suggest that investors utilize numerous grades, not just value, when it comes to deciding whether a company is a good fit for their allocation needs.

American Eagle Outfitters, Inc. is a global specialty retailer. The Company offers clothing, accessories and personal care products under its American Eagle and Aerie brands. The Company operates through two segments: American Eagle and Aerie. American Eagle is an American jeans and apparel brand. Aerie is a lifestyle brand offering intimates, apparel, activewear, and swim collections. OFFLINE by Aerie offers a complete collection of activewear and accessories. The Company sells its products directly to consumers through its retail channel, which includes its stores and concession-based shops-within-shops. It operates stores in the United States, Canada, Mexico, and Hong Kong. The Company has license agreements with third parties to operate American Eagle and Aerie stores and online marketplace businesses throughout Asia, including India, Europe, Latin America, and the Middle East. The Company also operates Todd Snyder New York (Todd Snyder), a premium menswear brand.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

American Eagle Outfitters Inc has a Value Score of 66, which is considered to be undervalued.

When you look at American Eagle Outfitters Inc’s price-to-sales ratio at 0.83 compared to the industry median at 0.49, this company has a higher price relative to revenue compared to its peers. This could make American Eagle Outfitters Inc’s stock less attractive for value investors.

American Eagle Outfitters Inc’s price-earnings ratio is 25.82 compared to the industry median at 14.24. This means it has a higher share price relative to earnings compared to its peers. This could make American Eagle Outfitters Inc less attractive for value investors.

Now, let’s assess American Eagle Outfitters Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 6.8, when compared to the industry median of 7.0, the company may be considered undervalued in relation to its peers. Value investors could use the enterprise multiple to identify stocks that are considered overvalued or undervalued relative to their industry.

Shareholder yield is the sum of a stock’s dividend yield (paid over previous 12 months minus special dividends) and the percentage of net share buybacks over the previous 12 months. American Eagle Outfitters Inc’s shareholder yield is the same than its industry median ratio of 1.25%. Value investors may look for an attractive shareholder yield because it can be a powerful tool for identifying if the company has a good management team.

Lastly, let’s take a look at American Eagle Outfitters Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. American Eagle Outfitters Inc’s price-to-free-cash-flow ratio is higher than its industry median ratio of 14.38. This could make American Eagle Outfitters Inc less attractive because the higher P/FCF ratio indicates that American Eagle Outfitters Inc is undervalued. The P/FCF ratio metric can also be viewed over a long-term time frame to see if the company's cash flow to share price value is generally improving or worsening.

a.k.a. Brands Holding Corp. is a group of fashion brands for the consumers. The Company's brands share a common focus on Millennial and Gen Z consumers who seek fashion inspiration on social media and primarily shop online. It utilizes real-time data and consumer insights to identify the latest trends and work with its global sourcing network and brand partners to bring new products to market. It operates primarily in two geographies, the United States and Australia. It operates four brands: two women's brands, Princess Polly and Petal & Pup and two streetwear brands, Culture Kings and mnml. The brands offer its customers a curated assortment from third-party streetwear brands, as well as a large and growing portfolio of in-house designed brands and products that embody the relationship between music, sports, art and fashion. The Company's subsidiaries include a.k.a. Brands Intermediate Holding Corp., New Excelerate GP, Limited, AKA Brands, Inc., and CK Holdco Pty., Ltd., among others.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

AKA Brands Holding Corp has a Value Score of 70, which is considered to be undervalued.

AKA Brands Holding Corp’s price-to-book ratio is higher than its peers. This could make AKA Brands Holding Corp less attractive for value investors when compared to the industry median at 2.18.

You can read more about AKA Brands Holding Corp’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Digital Brands Group, Inc. offers a variety of apparel products through direct-to-consumer and wholesale distribution. The Company's portfolio consists of various brands, including Bailey 44, DSTLD, Stateside and Sundry. DSTLD is a digital direct-to-consumer brand, which offers stylish garments without the luxury retail markup valuing customer experience over labels. Bailey 44 is a wholesale brand, which combines fabrics and on-trend designs to create sophisticated ready-to-wear capsules for women. DSTLD offers stylish high-quality garments without the luxury retail markup valuing customer experience over labels. Stateside is a wholesale brand, which is an elevated brand with all knitting, dyeing, cutting and sewing sourced and manufactured locally in Los Angeles. Sundry offers a collection of women’s clothing, including dresses, shirts, sweaters, skirts, shorts, athleisure bottoms and other accessory products. Sundry’s products are coastal casual and consist of colorful designs.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Digital Brands Group Inc has a Value Score of 73, which is considered to be undervalued.

Digital Brands Group Inc’s price-to-book ratio is higher than its peers. This could make Digital Brands Group Inc less attractive for value investors when compared to the industry median at 2.18.

You can read more about Digital Brands Group Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Designer Brands Inc. is a designer, producer and retailer of footwear brands and accessories. The Company operates through three segments: the U.S. Retail segment, the Canada Retail segment, and the Brand Portfolio segment. The U.S. Retail segment operates the DSW Designer Shoe Warehouse (DSW) banner through its direct-to-consumer United States stores and e-commerce site. The Canada Retail segment operates The Shoe Company and DSW banners through its direct-to-consumer Canada stores and e-commerce sites. The Brand Portfolio segment is engaged in sale of wholesale products to retailers and international distributors; commissions for serving retailers as the design and buying agent for products under private labels; and the sale of branded products. The Company sells its branded products on direct-to-consumer e-commerce sites for the Vince Camuto, Keds, Hush Puppies, and Topo brands. The Company’s Topo business designs specialty athletic footwear.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Designer Brands Inc has a Value Score of 87, which is considered to be undervalued.

Designer Brands Inc’s price-earnings ratio is 25.8 compared to the industry median at 14.2. This means that it has a higher price relative to its earnings compared to its peers. This makes Designer Brands Inc less attractive for value investors.

Designer Brands Inc’s price-to-book ratio is higher than its peers. This could make Designer Brands Inc less attractive for value investors when compared to the industry median at 2.18.

You can read more about Designer Brands Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Signet Jewelers Ltd is a Bermuda-based holding company. The Company is a retailer of diamond jewelry. Its segments include North America, International and Other. The North America segment operates across the United States and Canada. Its United States stores operate nationally in malls and off-mall locations, as well as online, principally as Kay (Kay Jewelers and Kay Outlet), Zales (Zales Jewelers and Zales Outlet), Jared (Jared The Galleria Of Jewelry and Jared Vault), Diamonds Direct, Banter by Piercing Pagoda, Rocksbox, and digital banners, James Allen and Blue Nile. Its Canadian stores operate as Peoples Jewellers. The International segment operates stores in the United Kingdom, Republic of Ireland and Channel Islands, as well as online. Its stores operate in shopping malls and off-mall locations principally under the H. Samuel and Ernest Jones banners. Other segment consists of subsidiaries involved in the purchasing and conversion of rough diamonds to polished stones.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Signet Jewelers Ltd has a Value Score of 84, which is considered to be undervalued.

Signet Jewelers Ltd’s price-earnings ratio is 7.3 compared to the industry median at 14.2. This means that it has a lower price relative to its earnings compared to its peers. This makes Signet Jewelers Ltd more attractive for value investors.

Signet Jewelers Ltd’s price-to-book ratio is lower than its peers. This could make Signet Jewelers Ltd fairly attractive for value investors when compared to the industry median at 2.18.

You can read more about Signet Jewelers Ltd’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Tapestry, Inc. is a global house of luxury accessories and lifestyle brands. The Company's brands include Coach, Kate spade New York, and Stuart Weitzman. The Company operates through three segments: Coach, Kate Spade and Stuart Weitzman. The Coach segment includes global sales of Coach products to customers through Coach operated stores, including e-commerce sites and concession shop-in-shops, and sales to wholesale customers and through independent third-party distributors. The Kate Spade segment includes global sales primarily of kate spade new york brand products to customers through Kate Spade operated stores, including e-commerce sites and concession shop-in-shops, sales to wholesale customers, and through independent third-party distributors. The Stuart Weitzman segment includes global sales of Stuart Weitzman brand products primarily through Stuart Weitzman operated stores, sales to wholesale customers, through e-commerce sites, and through independent third-party distributors.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Tapestry Inc has a Value Score of 68, which is considered to be undervalued.

Tapestry Inc’s price-earnings ratio is 11.2 compared to the industry median at 14.2. This means that it has a lower price relative to its earnings compared to its peers. This makes Tapestry Inc more attractive for value investors.

Tapestry Inc’s price-to-book ratio is lower than its peers. This could make Tapestry Inc more attractive for value investors when compared to the industry median at 2.18.

You can read more about Tapestry Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Value is just one of the five Stock Grades included in our A+ Investor service. AAII members can see the top-graded stocks—those with grades of A or B for value, growth, momentum, earnings estimate revisions and quality—on the A+ Stock Grades Screener.

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Now that you have a bit more background about each of the 6 undervalued stocks in the Retailers - Apparel & Accessories industry as well as their overall grades, it’s time for you to conduct additional research to see if these could fit your portfolio needs based on your goals and risk tolerance. AAII can help you figure out both and identify which investments align with what works best for you.

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