What about AEOS?

**dchamber** Fri Feb 03, 2006 4:23 pm

What about AEOS?
I've been studying value investing for a while but have not actually bought anything. I'm in the process of transferring a SEP IRA to brokerage account but for no almost everything is in Vanguard funds. I've got a few picks and wanted to see what other people think about them.

I'm looking at American Eagle (AEOS).
I saw some mention of it here about a month ago and the price a risen a bit but it still seems to be a barging.
Earning growth predictions are 14.5%. Over the last 10 years the earnings growth has been over 31% so 14.5% seems conservative. ValueLine estimates a 22% rate but I’ll go with the lowest value to add to my ‘margin of safety’. 15.5% certainly seems doable given the past earnings.

They seem to be in great financial shape with a current ratio over 3.
They have a history of increasing book value over 29% a year for the last 10 years.
I like to see a return on equity over 15% and they beat this 8 out of the last 10 years with an average ROE of 21%.
The current P/E is 14 but their average is for 10 years is 18.

I think with a growth rate of 14.5% the stock price has a 10 year target of $100-$105 with another $8 or so in dividends. This should provide a 15% annualized gain over 10 years. Perhaps a little more if their earnings stay in line with historical earnings but I use the lower of analyst estimates and historical.

This is my first post. I would appreciate any comments both on the stock, and my reasoning. I've got a few more picks that I'll post about but the next posts will be smaller.

**blast_investor** Fri Feb 03, 2006 5:15 pm

I like this stock AEOS.

This stock has very high return on asset or return on equity, which indicates superior growth potential down the road. The stock is not that expensive either.

This stock also meet Joel Greenblatt's magic formula criteria.

This stock pick won a contest here weeks ago:

http://value-investing-forum.com/viewtopic.php?t=655