Deckers (DECK) jumped from $42 to $45 after it reported last quarter’s earnings. That move was big in my eyes because the stock had been on a slide that started when the stock was over $100 late last year. Is this a signal to get in? Let’s see…
Deckers is in a year of transition. The company is changing its distribution model overseas and that’s taking some time (and money). Profits are going to be down this year. There’s also some oversupply that needs to be worked through. But once this passes, DECK could be a 25% grower again. This is a stock to watch.
One Year Chart
The ride down has been relentless. But it’s getting to the point where DECK is just too good to pass up. That’s why the pop after earnings got my attention
But what I want to see is estimates increase. They didn’t. 2012’s estimate just fell from $4.53 to $4.44. Nxt Qtr was supposed to be -8% growth, that just fell to -29%.
This is the second straight quarter annual estimates fell, and the company has been lowering quarterly estimates for more than a year now. This is getting tiring, so I’m taking my Fair Value P/E down.
Fair Value
DECK used to be worth 25 times earnings. Last quarter I thought it was worth 15 times. Now even that’s too high — these annual estimates keep falling. DECK is now worth 13 times earnings to me. Upside is good, but is estimates decline next quarter, that will bring the Fair Value down too.
Sharek’s Take
Deckers stock still isn’t ripe to buy. It needs time to get through inventory issues. I’ll keep DECK on my radar because its a great grower in the long-term (see the Ten Year Chart), but I don’t think this stock will make a meaningful move higher until annual estimates stop falling.
View the Earnings Table here.View the Ten-Year Chart here.
