Forget the Sydney Sweeney Hype: This Apparel Stock Has Real Growth

If you’ve been on social media lately, you’ve probably seen the viral Sydney Sweeney x American Eagle (NYSE: AEO) campaign. It sparked plenty of attention for AEO — and spiked the stock price.

But here’s the thing: hype doesn’t always equal a strong investment.

Right now, American Eagle Outfitters has a D rating in our Zen Ratings system … a Sell. It’s also not a consensus Buy according to the 6 top-rated Wall Street analysts we track who cover the stock:

However, there IS an apparel stock that shines — and now could be an opportune time to buy.

Our highest-rated stock in the entire apparel space earns a Solid B rating from our Zen Ratings system, indicating it’s in a class of stocks that has historically delivered 19.88% annual returns — solidly beating the S&P 500.

And that ticker is…

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The highest-rated stock in the entire apparel space...

Urban Outfitters (NASDAQ: URBN), which holds a solid B rating, or Buy.

Below, I’ll go into how URBN backs up its brand power with superior growth, stronger financials, and better capital allocation than AEO.

Why URBN Stands Out

Urban Outfitters operates three major brands: Urban Outfitters, Anthropologie, and Free People. 

While the flagship Urban Outfitters brand has slowed over the years, Anthropologie and Free People have been long-term growth engines, compounding sales for more than a decade. That strength has helped URBN steadily grow total sales while many apparel retailers have struggled.

On top of that, URBN’s management has been highly effective with its cash. Over the past decade, it’s converted a large portion of its profits into free cash flow, funding both expansion and substantial share buybacks … all while maintaining a net cash position. That balance sheet strength gives it flexibility that many competitors can’t match.

Growth & Ratings Edge

Even with its growth track record, URBN trades at a discount to peers, with valuations that make it one of the more affordable names in retail. But what really sets URBN apart in this space is its growth. 

URBN scores a B in our Growth Component Grade which measures factors like: 

• Sales acceleration (short-term): Tracks recent sales growth to assess business momentum.
• EPS growth (next 12 months): Projected earnings growth over the coming year.
• Profit margin improvement: Analyzes potential for improved profitability.
• Free cash flow momentum: Assesses cash flow growth generated after capital expenditures.

In comparison, AEO scores an F for Growth.

What does that mean? 

• URBN is already growing … it’s showing up in the numbers (and in the stock price chart).
• AEO’s growth is all speculative and hasn’t happened yet … it all depends on hype around a recent marketing campaign that may or may not pan out into the future.  

Bottom Line

While AEO gets the headlines today, URBN is the one with staying power. Its diversified brand portfolio, disciplined financial management, and growth in higher-end segments make it the kind of retailer that can quietly outperform, no viral campaign required.

Click here to see our full breakdown of URBN.

Click here to see our full breakdown of AEO.

Click here to see other apparel stocks.

What to Do Next?

• 9 Special Stock Lists You Need Now >
• See All “A” Rated Stocks with +32.52% Average Annual Return >
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