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Break Out Baby!

Stock (Symbol) Stock Price

Deckers Outdoor (DECK)

$92

Data is as of Expected to Report Sector

April 14

Apr 28

Retail & Restaurant

Sharek’s Take
David SharekDeckers (DECK) is breaking out right now, and I would be a buyer on the strength because there’s a lot of positives to mention: 

  • There were big time estimate increases after the company last reported earnings. 
  • The estimated Long Term Growth Rate rose from 24% to 29%.
  • The P/E is 20.

In a nutshell, I’m high on DECK right now and will move it up in my Power Rankings.

One-Year Chart
Here’s the one-year chart of Deckers as of yesterday. The negative is estimates show poor growth ahead, but that’s because og two factors. 

  1. The company is spending money on ads for its men’s UGG line, featuring Tom Brady.
  2. The company is building infrastructure in Europe to ship footwear directly to stores, cutting out the middle man.

Both factors will hurt profits the next two quarters, but raise profits thereafter.

Earnings Table
DECK’s profits rose 30% last quarter on a 24% increase in sales. UGG contribute around 95% of sales.
 
The company can be counted on to whip earnings estimates, so don’t get discouraged by poor quarterly estimates ahead.
 
Annual Profit Estimates surged. So much that I did a double-take and had to confirm these figures. 2012 estimates increased a whopping 22% from the estimate just three months ago.As mentioned above, quarterly estimates will stink the next couple of quarters. Let me change that, might stink, as DECK should beat the street. Don’t let quarterly estimates discourage you about Decker’s prospects.
Fair Value
DECK is easily worth 25 times earnings — right now 30 times because of the big jumps in annual estimates and the fact the LTG is now 29%. There’s solid upside this year and next year.
Ten-Year Chart
Deckers last had a P/E of 25 in 2007. I was lucky to buy the shares at $24 on 6/11/09. I remembered what a great stock this was before the 2008 market crash and shoes usually outperform first as people replace shoes after a recession ends. Stellar yearly profit growth of 44% and stock growth of 54%.
 
2003 was when profits took off, jumping 117%, had you bought the last day of 2003 you’d be in at $7 (had you held).
Power Ranking Bottom Line
Growth Portfolio

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This stock has the legs to run higher. BIG increases in Annual Profit Estimates and a solid outlook make this one of the top stocks in the market.
  
Deckers is currently ranked 8th out of 21 stocks in the Growth Portfolio Power Rankings. The only negative is quarterly estimates don’t look great. I also don’t know how high a P/E this stock can get. 25 for sure, 30 might be stretching it.
 
I will replace Ancestory.com (ACOM) with Deckers in the Aggressive Growth Portfolio. This stock is proving to be too strong to be left out. ACOM is selling for around its fair value and didn’t beat the street last quarter — DECK is timelier.
Aggressive Growth Portfolio

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