Fools,
After the recent pullback, Skechers has become interesting to me. Having not done any analysis in the past and missing the extremely good increase in the stock the last couple of years, I wanted to try to determine how much runway is left.
Qtr EPS QoQGr TTMEPS TTMGr Hi Lo Close P/E P/E Hi P/E Lo 1YrPeg
Mar-11 0.24 $23.66 $17.86 $20.54
Jun-11 -0.62 $21.47 $13.29 $14.48
Sep-11 0.17 $17.88 $13.31 $14.03
Dec-11 -1.18 $15.42 $11.75 $12.12
Mar-12 -0.07 -129.2% -1.70 $14.70 $11.21 $12.72 -7.5 -8.6 -6.6
Jun-12 -0.04 -93.5% -1.12 $21.50 $12.50 $20.37 -18.2 -19.2 -11.2
Sep-12 0.22 29.4% -1.07 $22.37 $18.07 $20.40 -19.1 -20.9 -16.9
Dec-12 0.08 -106.8% 0.19 $20.74 $15.18 $18.50 97.4 109.2 79.9
Mar-13 0.13 -285.7% 0.39 -122.9% $22.61 $17.02 $21.15 54.2 58.0 43.6 -0.44
Jun-13 0.14 -450.0% 0.57 -150.9% $24.50 $19.99 $24.01 42.1 43.0 35.1 -0.28
Sep-13 0.53 140.9% 0.88 -182.2% $31.56 $23.93 $31.11 35.4 35.9 27.2 -0.19
Dec-13 0.28 250.0% 1.08 468.4% $34.95 $26.62 $33.13 30.7 32.4 24.6 0.07
Mar-14 0.61 369.2% 1.56 300.0% $36.78 $26.46 $36.54 23.4 23.6 17.0 0.08
Jun-14 0.68 385.7% 2.10 268.4% $47.53 $33.14 $45.70 21.8 22.6 15.8 0.08
Sep-14 1.00 88.7% 2.57 192.0% $64.69 $44.46 $53.31 20.7 25.2 17.3 0.11
Dec-14 0.43 53.6% 2.72 151.9% $62.34 $47.76 $55.25 20.3 22.9 17.6 0.13
Mar-15 1.10 80.3% 3.21 105.8% $74.25 $55.23 $71.91 22.4 23.1 17.2 0.21
Jun-15 1.55 127.9% 4.08 94.3% $114.79 $70.00 $109.79 26.9 28.1 17.2 0.29
=============================================================================================
Sep-15 1.35 34.8% 4.43 72.3% $102.43 $77.75 $140.00 31.6 0.44
Dec-15 0.68 58.1% 4.68 72.0% $108.21 $82.14 $140.00 29.9 0.42
Mar-16 1.51 37.2% 5.09 58.5% $117.68 $89.34 $140.00 27.5 0.47
Jun-16 2.13 37.2% 5.66 38.8% $131.03 $99.47 $140.00 24.7 0.64
Sep-16 1.85 37.2% 6.17 39.3% $142.64 $108.28 $140.00 22.7 0.58
Dec-16 0.93 37.2% 6.42 37.2% $148.50 $112.73 $140.00 21.8 0.59
The company has been performing really well. In fact, at today’s price of about $140/share, its P/E of 34.3 is higher now than at any time since September, 2013 when it hit a high of 35.4. Earlier this quarter, the P/E reached 39.2 when the stock price was at $160.
Okay, the stock is not cheap. But considering its growth projections, it’s not expensive. However, it looks like I missed out on the incredible run the company has had over the last year.
However, if they hit analyst estimates of $6.42 by the end of 2016, today’s price would reflect a P/E of 21.8. Such a price to earnings 16 months from now within the low-middle part of the P/E range over the last few years. This seems okay. But I won’t expect to earn as much as many of you have earned over the past year.
Also, Quarter over quarter earnings were up over 127% the last quarter. Earnings aren’t expected to grow nearly that fast with analysts projecting just under 35% growth this quarter.
I’ve been a customer of Skechers for years, buying sneakers at the warehouse store every year or so when I traveled to Houston. I thought that the company wasn’t a good brand candidate, because of the way the product was sold.
Over the last few years, Skechers has done a pretty good job lining up interesting people to represent the brand. These include Joe Montana, Ringo Starr, Meb Keflezighi, Kara Goucher, model Kelly Brook, Pete Rose Mariano Rivera, Sugar Ray Leonard. Plus, they are ding a lot of marketing to children, having used games as goodies in the show box. One doesn’t have to be an athlete to identify with the brand, but some really great athletes do.
Skechers brand is for real. Also, they have really nice company stores and a lot of shelf-space in the athletic stores.
Revenues look pretty good.
Rev Mar Jun Sep Dec Tot
2011 476.2 434.4 412.2 283.2 1,606
2012 351.3 384.0 429.4 395.6 1,560
2013 451.6 428.2 515.8 450.7 1,846
2014 546.5 587.1 674.2 569.7 2,377
2015 768.0 800.5 1,568
So do gross profits.
GrPr Mar Jun Sep Dec
2011 192.6 143.3 175.2 112.6
2012 155.7 171.3 187.8 168.5
2013 192.7 269.4 230.5 200.6
2014 240.4 269.4 304.5 257.6
2015 332.5 374.6
GM Mar Jun Sep Dec
2011 40.4% 33.0% 42.5% 39.8%
2012 44.3% 44.6% 43.7% 42.6%
2013 42.7% 62.9% 44.7% 44.5%
2014 44.0% 45.9% 45.2% 45.2%
2015 43.3% 46.8%
Where it gets interesting is the net margin. The acceleration is pretty impressive.
EBITMar Mar Jun Sep Dec
2011 2.9% -11.7% 0.4% -33.7%
2012 -2.1% -1.1% 3.6% 1.7%
2013 2.2% 3.1% 8.2% 3.7%
2014 8.1% 8.6% 10.1% 5.0%
2015 10.5% 14.0%
Cash is increasing really well and LT debt is now a really small burden to the company.
Cash Mar Jun Sep Dec LT Debt
2011 $351 2011 $81
2012 $392 $374 $308 $326 2012 $78 $71 $70 $129
2013 $265 $333 $333 $372 2013 $126 $123 $120 $118
2014 $329 $415 $441 $467 2014 $116 $125 $128 $35
2015 $397 $514 2015 $35 $26
The company has been performing really well and lining up people with extremely wide appeal to create the brand. While, according to historical value points, the company isn’t cheap, I think it’s a really good time to start investing, and I’ve done so over the last few weeks during the minor correction.
If I think about the relative value of the company to Adidas (about ½ the value), I think there is a lot of room to run. Also, their market cap is only about a third of Under Armor’s and less than a tenth of Nike’s.
Given the expected performance, the valuation should remain under a 1 Year Peg of 1, even with nice earnings growth through the end of 2016. If they hit $6.42 in earnings by the end of 2016, this is what the stock price will do compared to today’s price of $140:
15 20 25 30 35 40
$96 $128 $161 $193 $225 $257
-31% -8% 15% 38% 61% 83%
DJ