I did a review of 19 retail apparel stores and discovered that Abercrombie & Fitch (ANF) fits all of my fundamental investment criteria, states Crista Huff, growth and income specialist and editor of Cabot Undervalued Stocks Advisor.

Abercrombie is a leading, global specialty retailer of apparel and accessories for men, women and kids, operating under the Abercrombie & Fitch, abercrombie kids, Hollister and Gilly Hicks brands.
The Company operates more than 865 stores under these brands across North America, Europe, Asia and the Middle East, as well as e-commerce sites.

Wall Street consensus earnings estimates forecast 2019 and 2020 EPS growth rates of 49.2% and 17.5% (January year-end). The 2020 price/earnings ratio (P/E) is 17.6, and the debt-to-capital ratio is low at 21%.

Let me be blunt about the earnings estimates. Analysts and company management do a terrible job of forecasting Abercrombie’s earnings. Full-year 2018 EPS came in about twice what analysts had expected.

Since that time, the 2019 and 2020 consensus estimates have been revised upward, repeatedly. The good news is that the earnings surprises have been pleasant, but the bad news is that we could also experience a big earnings miss that nobody foresaw.

Fortunately, the company reaffirmed their 4th quarter outlook on January 14, so I’m not expecting much volatility upon the March 6 earnings release.

ANF is a small-cap stock. The dividend is hefty, and the payout has remained unchanged for many years. There’s about 33% upside as ANF eventually retraces its 2018 high near $29. Risk-tolerant growth stock investors and traders should buy ANF now.

The company offers a yield 4.0% and I love their price chart, so ANF is joining the "Buy Low Opportunities" model portfolio. I rate the stock a strong buy.

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