I thought this was interesting, but maybe just because I am long both:
In 2014, Michael Kors grew revenue 51%, and then in 2015, it grew another 32%. In both years, it added a billion dollars to its top line. However, despite KORS’s growth in 2014 and 2015, its stock was still falling fast, from a peak of $100 to a low of $35. Ironically, the company’s growth has since slowed - 7% this fiscal year and it is expected to grow another 4% next year - but its stock has gone higher. KORS is nearly 50% above the low it set back in January of this year.
In my opinion, the reason KORS’s stock has finally begun to soar is because it got too cheap, and the doomsday scenario that so many were betting on, didn’t pan out. As seen below, KORS carried a P/E ratio below 8.5 at one point this year. And while KORS has rallied this year, it is still very cheap relative to earnings, much cheaper than other retailers that have no growth at all.
Looking at SKX, there are a lot of similarities between it and KORS. In particular, there is no logical way to explain a company with high 20% growth (like SKX) that is trading at less than 12x forward earnings. Much like KORS, the fact that SKX has fallen so much despite maintaining its rapid growth is what makes it such a great investment.
With that said, there is one big difference between KORS and SKX: Skechers is nowhere near the end of its growth line - its first quarter results and second quarter guidance proves that - and it has a much better chance to maintain its growth rate long term.
I would definitely encourage you to read the entire piece at http://seekingalpha.com/article/3967286-skechers-stay-cheap-…
IMHO, both are enticingly undervalued. But there is no doubt in my mind that SKX offers the better growth prospects for all the reasons Saul and the other fine posters of this board have listed.
For those who are interested, you can read my thoughts on KORS here: http://discussion.fool.com/michael-kors-kors-report-31985499.asp…
Anyway, like I said, I found the article interesting.
Matt
Long KORS and SKX
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