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Improved Earnings Required Before Abercrombie & Fitch Co. (NYSE:ANF) Stock's 70% Jump Looks Justified

Simply Wall St · 1d ago

Abercrombie & Fitch Co. (NYSE:ANF) shareholders would be excited to see that the share price has had a great month, posting a 70% gain and recovering from prior weakness. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 19% over that time.

Even after such a large jump in price, Abercrombie & Fitch's price-to-earnings (or "P/E") ratio of 10.4x might still make it look like a buy right now compared to the market in the United States, where around half of the companies have P/E ratios above 20x and even P/E's above 34x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

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Recent times haven't been advantageous for Abercrombie & Fitch as its earnings have been rising slower than most other companies. The P/E is probably low because investors think this lacklustre earnings performance isn't going to get any better. If you still like the company, you'd be hoping earnings don't get any worse and that you could pick up some stock while it's out of favour.

See our latest analysis for Abercrombie & Fitch

pe-multiple-vs-industry
NYSE:ANF Price to Earnings Ratio vs Industry December 16th 2025
Keen to find out how analysts think Abercrombie & Fitch's future stacks up against the industry? In that case, our free report is a great place to start.

Does Growth Match The Low P/E?

Abercrombie & Fitch's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

Taking a look back first, we see that there was hardly any earnings per share growth to speak of for the company over the past year. However, a few strong years before that means that it was still able to grow EPS by an impressive 1,871% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Shifting to the future, estimates from the eight analysts covering the company suggest earnings growth is heading into negative territory, declining 5.3% over the next year. That's not great when the rest of the market is expected to grow by 16%.

With this information, we are not surprised that Abercrombie & Fitch is trading at a P/E lower than the market. Nonetheless, there's no guarantee the P/E has reached a floor yet with earnings going in reverse. There's potential for the P/E to fall to even lower levels if the company doesn't improve its profitability.

The Final Word

Despite Abercrombie & Fitch's shares building up a head of steam, its P/E still lags most other companies. We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Abercrombie & Fitch maintains its low P/E on the weakness of its forecast for sliding earnings, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

You should always think about risks. Case in point, we've spotted 3 warning signs for Abercrombie & Fitch you should be aware of, and 2 of them are a bit unpleasant.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a low P/E.