Abercrombie & Finch ($ANF) is Cool Again.. and the Stock is GROSSLY Undervalued

You might think of Abercrombie & Finch as the store you used to shop at when at the mall as a teenager.. you know, the store with the clothes that had Abercrombie & Finch written all over everything? (Same thing with their other store Hollister). Personally I hated that their idea of fashion was to have their customers become walking advertisements.. But here's the thing: their clothes are actually kinda cool now. They have thankfully adapted to the times and are offering a very inoffensive and trendy selection of clothing. It also isn't painful to walk into Abercrombie/Hollister as they are no longer perfume/fragrance infested dungeons (you know what I'm talking about.) They have also carved out an impressive revenue source from their online stores which I think has a decent moat based on their brand recognition (you can't buy Abercrombie/Hollister clothes anywhere else, Amazon etc.) and their free 2 day shipping on most items.. But most of you don't care about that. You're all wondering why any of this matters. Well, because fundamentally the stock is undervalued in key metrics that make me think the stock has massive upside. Let me just quickly paint the picture here: Current Multiples 4x TTM EV/EBITDA .5x TTM Price/Sales - $1.8B Market cap but >$3B annual revenue run rate <5x Price/Cash Flow TTM - ($360m TTM Free cash flow!) Aggressive share buybacks - $235m worth TTM Extremely reasonable debt situation: 0.41 Debt to assets, 1.39 Debt to Equity Close to 60% gross margins (!!!!) 46% of net sales are coming from the online stores Finally but most importantly: The clothes don't have their stupid logo/name all over them anymore and are actually fashionable. I think in a market with insane multiples on pre-revenue companies that value is a safe place to be, and although clothing retail is as boring of a sector as it gets, the multiples here cannot be overlooked. $ANF is undervalued. It should trade higher than the current price.

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Abercrombie & Finch ($ANF) is Cool Again.. and the Stock is GROSSLY Undervalued

bullish

You might think of Abercrombie & Finch as the store you used to shop at when at the mall as a teenager.. you know, the store with the clothes that had Abercrombie & Finch written all over everything? (Same thing with their other store Hollister). Personally I hated that their idea of fashion was to have their customers become walking advertisements..

But here's the thing: their clothes are actually kinda cool now. They have thankfully adapted to the times and are offering a very inoffensive and trendy selection of clothing. It also isn't painful to walk into Abercrombie/Hollister as they are no longer perfume/fragrance infested dungeons (you know what I'm talking about.) They have also carved out an impressive revenue source from their online stores which I think has a decent moat based on their brand recognition (you can't buy Abercrombie/Hollister clothes anywhere else, Amazon etc.) and their free 2 day shipping on most items..

But most of you don't care about that. You're all wondering why any of this matters. Well, because fundamentally the stock is undervalued in key metrics that make me think the stock has massive upside. Let me just quickly paint the picture here:

Current Multiples

  • 4x TTM EV/EBITDA

  • .5x TTM Price/Sales - $1.8B Market cap but >$3B annual revenue run rate

  • <5x Price/Cash Flow TTM - ($360m TTM Free cash flow!)

  • Aggressive share buybacks - $235m worth TTM

  • Extremely reasonable debt situation: 0.41 Debt to assets, 1.39 Debt to Equity

  • Close to 60% gross margins (!!!!)

  • 46% of net sales are coming from the online stores

  • Finally but most importantly: The clothes don't have their stupid logo/name all over them anymore and are actually fashionable.

I think in a market with insane multiples on pre-revenue companies that value is a safe place to be, and although clothing retail is as boring of a sector as it gets, the multiples here cannot be overlooked. $ANF is undervalued. It should trade higher than the current price.

read-time
1 min
40.00
Target Price
8/ 10
Confidence
6-12 Months
Timeframe
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