mining an SA article on SKX

I didn’t enjoy this whole article:…

But I did find some good common sense points to pull out:

[quote from CNN Money article]“Skechers also painted a gloomy picture by projecting third-quarter numbers that would miss Wall Street’s targets.” (12% year over year revenue growth for a sneaker company should never be called “gloomy”)

At 50 bucks per share over a year ago, investors were paying over 30 times earnings for potential growth. After Friday, you would be paying 12.5 times earnings for somewhat lower growth. Sentiment at a 30 plus multiple was good and value bad. At a 12.5 times multiple, sentiment is bad and value is good. Of course don’t forget, all those earnings from the last few years are sitting in the bank as the company reported over 600 million of cash at June 30, 2016.

To be clear, we are not saying the stock price turns right around and starts to head higher in the short term. That we do not know, and frankly, we do not care where the stock goes in the very near term. Could we churn in this range for a few months? Could more people quit on Skechers stock and send it heading toward 20? Yes and yes. Sentiment and negativity have a tendency to go away though once the panic selling subsides.

The current market cap is 3.8 billion versus 4.8 billion on Thursday before Q2 results were reported. In 3 years, Skechers could be doing 5 billion in revenue and 3.00 to 4.00 in earnings. With a reasonable earnings multiple of 15-17, the stock could get to 50 dollars a share or a 7.5 billion dollar valuation.

I don’t typically put much credence in valuation guesses, but this one is based on fundamentals. I agree that SKX is an easy double. Will it take a year or 3 years? I don’t know. But how many companies can you name that are as steady, profitable, untethered to cyclical risks or technological advances, gaining market share against the competition, growing both revenue and brand value, and trading at a crazy low multiple?

That’s the way I see it. Buy low and sell high, my friends.



Nice article thanks for sharing. I like to read posts like that which incorporate market psychology into their analysis…and I especially appreciate those who tell it like it is and point out that Analysts tend to be no better than anyone making minimal efforts at picking stocks.