Abercrombie & Fitch Company (ANF) Hit a 52 Week High, Can the Run Continue?

Shares of Abercrombie & Fitch (ANF) have been strong performers lately, with the stock up 26.1% over the past month. The stock hit a new 52-week high of $146.31 in the previous session. Abercrombie & Fitch has gained 64.2% since the start of the year compared to the 10.9% move for the Zacks Retail-Wholesale sector and the 14.2% return for the Zacks Retail - Apparel and Shoes industry.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on March 6, 2024, Abercrombie reported EPS of $2.97 versus consensus estimate of $2.81 while it beat the consensus revenue estimate by 2.08%.

For the current fiscal year, Abercrombie is expected to post earnings of $7.69 per share on $4.53 billion in revenues. This represents a 22.45% change in EPS on a 5.93% change in revenues. For the next fiscal year, the company is expected to earn $7.78 per share on $4.73 billion in revenues. This represents a year-over-year change of 1.18% and 4.39%, respectively.

Valuation Metrics

Abercrombie may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.

On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.

Abercrombie has a Value Score of A. The stock's Growth and Momentum Scores are A and D, respectively, giving the company a VGM Score of A.

In terms of its value breakdown, the stock currently trades at 18.8X current fiscal year EPS estimates, which is a premium to the peer industry average of 16.2X. On a trailing cash flow basis, the stock currently trades at 15.5X versus its peer group's average of 8.8X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Abercrombie currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Abercrombie fits the bill. Thus, it seems as though Abercrombie shares could have potential in the weeks and months to come.

How Does ANF Stack Up to the Competition?

Shares of ANF have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is J.Jill, Inc. (JILL). JILL has a Zacks Rank of # 2 (Buy) and a Value Score of A, a Growth Score of C, and a Momentum Score of D.

Earnings were strong last quarter. J.Jill, Inc. beat our consensus estimate by 2,400%, and for the current fiscal year, JILL is expected to post earnings of $3.38 per share on revenue of $615.1 million.

Shares of J.Jill, Inc. have gained 26.7% over the past month, and currently trade at a forward P/E of 9.41X and a P/CF of 4.94X.

The Retail - Apparel and Shoes industry is in the top 34% of all the industries we have in our universe, so it looks like there are some nice tailwinds for ANF and JILL, even beyond their own solid fundamental situation.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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