Deckers Outdoor Corp (DECK, Financial) recently recorded a daily gain of 16.68% and a 3-month gain of 5.1%. Its Earnings Per Share (EPS) stands at 20.15. Given these figures, one might wonder: is the stock modestly overvalued? This article provides an in-depth valuation analysis of Deckers Outdoor (DECK) to answer that question. Let's delve deeper into the financials to find out.
Company Overview
Deckers Outdoor Corp designs and sells casual and performance footwear, apparel, and accessories. Its primary brands include UGG, Teva, and Sanuk. The company distributes most of its products through its wholesale business, but it also has a substantial direct-to-consumer business with its company-owned retail stores and websites. Most sales are in the United States, although the company also has retail stores and distributors throughout Europe, Asia, Canada, and Latin America. Deckers sources its products from independent manufacturers primarily in Asia.
Deckers Outdoor's stock price is currently $565.39, with a market cap of $14.80 billion. The GF Value, an estimation of fair value, is $488.2. This suggests that the stock could be modestly overvalued.
Understanding the GF Value
The GF Value represents the current intrinsic value of a stock derived from GuruFocus' exclusive method. The GF Value Line on our summary page provides an overview of the fair value that the stock should be traded at. It is calculated based on three factors:
- Historical multiples (PE Ratio, PS Ratio, PB Ratio and Price-to-Free-Cash-Flow) that the stock has traded at.
- GuruFocus adjustment factor based on the company's past returns and growth.
- Future estimates of the business performance.
Based on the GF Value, Deckers Outdoor (DECK, Financial) appears to be modestly overvalued. This suggests that the long-term return of its stock is likely to be lower than its business growth.
Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, it's crucial to review a company's financial strength before deciding to buy shares. Looking at the cash-to-debt ratio and interest coverage can provide a good initial perspective on the company's financial strength. Deckers Outdoor has a cash-to-debt ratio of 4.02, which ranks better than 79.25% of 983 companies in the Manufacturing - Apparel & Accessories industry. Based on this, GuruFocus ranks Deckers Outdoor's financial strength as 9 out of 10, suggesting a strong balance sheet.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is generally less risky. Deckers Outdoor has been profitable 9 out of the past 10 years. Over the past twelve months, the company had a revenue of $3.70 billion and Earnings Per Share (EPS) of $20.15. Its operating margin is 18.09%, which ranks better than 92.13% of 1042 companies in the Manufacturing - Apparel & Accessories industry. Overall, the profitability of Deckers Outdoor is ranked 9 out of 10, which indicates strong profitability.
Growth is one of the most important factors in the valuation of a company. Deckers Outdoor's 3-year average revenue growth rate is better than 87.41% of 1009 companies in the Manufacturing - Apparel & Accessories industry. Deckers Outdoor's 3-year average EBITDA growth rate is 26.1%, which ranks better than 74.27% of 855 companies in the same industry.
ROIC vs WACC
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Deckers Outdoor's ROIC was 45.7, while its WACC came in at 9.98.
Conclusion
In conclusion, the stock of Deckers Outdoor (DECK, Financial) appears to be modestly overvalued. The company's financial condition is strong, and its profitability is robust. Its growth ranks better than 74.27% of 855 companies in the Manufacturing - Apparel & Accessories industry. To learn more about Deckers Outdoor stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
