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American Eagle Outfitters (NYSE:AEO) sheds US$150m, company earnings and investor returns have been trending downwards for past year

The nature of investing is that you win some, and you lose some. Unfortunately, shareholders of American Eagle Outfitters, Inc. (NYSE:AEO) have suffered share price declines over the last year. The share price is down a hefty 59% in that time. We note that it has not been easy for shareholders over three years, either; the share price is down 35% in that time. Even worse, it's down 16% in about a month, which isn't fun at all. However, we note the price may have been impacted by the broader market, which is down 8.0% in the same time period.

If the past week is anything to go by, investor sentiment for American Eagle Outfitters isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

View our latest analysis for American Eagle Outfitters

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Unhappily, American Eagle Outfitters had to report a 32% decline in EPS over the last year. This reduction in EPS is not as bad as the 59% share price fall. This suggests the EPS fall has made some shareholders are more nervous about the business. The less favorable sentiment is reflected in its current P/E ratio of 10.53.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
earnings-per-share-growth

It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. It might be well worthwhile taking a look at our free report on American Eagle Outfitters' earnings, revenue and cash flow.

A Different Perspective

While the broader market lost about 16% in the twelve months, American Eagle Outfitters shareholders did even worse, losing 57% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 2% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand American Eagle Outfitters better, we need to consider many other factors. Case in point: We've spotted 4 warning signs for American Eagle Outfitters you should be aware of, and 1 of them is a bit concerning.

American Eagle Outfitters is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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