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Photo illustration by Cheng Xin/Getty Images Getty Images Here is why we believe Abercrombie & Fitch (ANF) stock deserves attention: It is expanding, generating cash, and is available at a considerable valuation discount. Let’s examine the figures. Cash Yield: Abercrombie & Fitch boasts a remarkable cash flow yield of 10.3%. Growing: The recent 12-month revenue growth of 9.3% indicates that the cash reserves will continue to rise. Valuation Discount: ANF stock is presently trading at 17% below its 3-month high, 48% below its 1-year high, and 56% under its 2-year high. Free Cash Flow Yield is calculated as free cash flow per share divided by stock price. Why is this important? If a company generates a substantial amount of cash per share, it can be utilized to support further revenue expansion, or simply distributed as dividends or repurchased to benefit shareholders. For some context, Abercrombie & Fitch functions as a specialty retailer providing apparel through its Hollister and A&Fitch brands, with around 729 stores located throughout Europe, Asia, Canada, the Middle East, the US, and other international sites. Individual stocks can be volatile, but there is significant value in a more comprehensive, diversified strategy. Strategic asset allocation and diversification enable you to remain invested. Were you aware that investors who panicked out of the S&P in 2020 missed out on substantial gains that came afterwards? Trefis High Quality Portfolio and Empirical Asset Management’s investment strategy are crafted to minimize volatility so you can maintain your investment course. Comparison with S&P500 Median But do these figures reveal the entire story? Read Buy or Sell ANF Stock to determine if Abercrombie & Fitch still possesses an advantage that remains solid. MORE FOR YOU The Point? The Market Can Notice, And Reward The following statistics stem from a “high FCF yield with growth and discount” selection strategy since 12/31/2016. The statistics are computed based on selections made on a monthly basis, and assume that once a stock is selected, it cannot be re-selected for the following 180 days. Average 6-month and 12-month forward returns of 25.7% and 57.9% respectively Win rate (percentage of selections yielding positive returns) of > 70% for both 6-month and 12-month intervals But Consider The Risk That being said, ANF isn’t immune to significant declines. It plummeted 83% during both the Dot-Com Bubble and the Global Financial Crisis. The inflation shock also severely impacted it, causing a near 70% drop. Even smaller shocks, such as those in 2018 and during Covid, resulted in declines of over 50%. Strong fundamentals are important, but when the market shifts, ANF demonstrates it can still experience serious setbacks. However, the risk is not confined to large market downturns. Stocks can decline even when the overall market is performing well – consider events such as earnings reports, business updates, or changes in outlook. Read ANF Dip Buyer Analyses to learn how the stock has bounced back from sharp declines in the past. Consistently picking winning stocks is a challenging endeavor – especially given the volatility tied to individual stocks. Instead, the Trefis High Quality (HQ) Portfolio, which comprises 30 stocks, has historically outperformed the S&P 500 over the past 4 years. Why is this the case? As a collective, HQ Portfolio stocks have yielded better returns with reduced risk compared to the benchmark index; thus avoiding extreme fluctuations, as demonstrated in HQ Portfolio performance metrics. Editorial StandardsReprints & Permissions
