Skechers Value

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1

Fools,

Just wanted to show you something interesting in the valuation and analyst estimates.

Earnings expectations, within the analyst community, are for $0.54 per share (47.3% QoQ growth), which would yield a trailing 12 months earning amount of $1.68 (56.7 YoY growth). Further, analysts expect earnings to come in at $2.08 for the year ending December, 2016 (38.4% YoY growth).

Looking at historical earnings and value ranges, one can see that Skechers is at its lowest valuation point (measured in earnings) over the past couple of years.

Unless the market knows something we don’t know, the price is too low for the amount of expected growth.


Qtr	EPS	QoQGr	TTMEPS	TTMGr	Hi	Lo	Close	P/E	P/E Hi	P/E Lo	1YrPeg
Mar-11	$0.08				$7.89	$5.95	$6.85				
Jun-11	-$0.21				$7.16	$4.43	$4.83				
Sep-11	$0.06				$5.96	$4.44	$4.68				
Dec-11	-$0.39				$5.14	$3.92	$4.04				
Mar-12	-$0.02	-129.2%	-0.57		$4.90	$3.74	$4.24	-7.5	-8.6	-6.6	
Jun-12	-$0.01	-93.5%	-0.37		$7.17	$4.17	$6.79	-18.2	-19.2	-11.2	
Sep-12	$0.07	29.4%	-0.36		$7.46	$6.02	$6.80	-19.1	-20.9	-16.9	
Dec-12	$0.03	-106.8%	0.06		$6.91	$5.06	$6.17	97.4	109.2	79.9	
Mar-13	$0.04	-285.7%	0.13	-122.9%	$7.54	$5.67	$7.05	54.2	58.0	43.6	-0.44
Jun-13	$0.05	-450.0%	0.19	-150.9%	$8.17	$6.66	$8.00	42.1	43.0	35.1	-0.28
Sep-13	$0.18	140.9%	0.29	-182.2%	$10.52	$7.98	$10.37	35.4	35.9	27.2	-0.19
Dec-13	$0.09	250.0%	0.36	468.4%	$11.65	$8.87	$11.04	30.7	32.4	24.6	0.07
Mar-14	$0.20	369.2%	0.52	300.0%	$12.26	$8.82	$12.18	23.4	23.6	17.0	0.08
Jun-14	$0.23	385.7%	0.70	268.4%	$15.84	$11.05	$15.23	21.8	22.6	15.8	0.08
Sep-14	$0.33	88.7%	0.86	192.0%	$21.56	$14.82	$17.77	20.7	25.2	17.3	0.11
Dec-14	$0.14	53.6%	0.91	151.9%	$20.78	$15.92	$18.42	20.3	22.9	17.6	0.13
Mar-15	$0.37	80.3%	1.07	105.8%	$24.75	$18.41	$23.97	22.4	23.1	17.2	0.21
Jun-15	$0.52	127.9%	1.36	94.3%	$38.26	$23.33	$36.60	26.9	28.1	17.2	0.29
Sep-15	$0.43	29.0%	1.46	70.0%	$54.53	$36.53	$44.69	30.7	37.4	25.1	0.44
Dec-15	$0.19	32.6%	1.50	65.8%	$49.28	$24.56	$30.21	20.1	32.8	16.3	0.31
=============================================================================================
Mar-16	**$0.54	47.3%**	1.68	56.7%	$62.77	$26.46	$26.70	15.9	37.4	15.8	0.28
Jun-16	**$0.59	14.2%**	1.75	28.7%	$65.51	$27.62	$26.70	15.3	37.4	15.8	0.53
Sep-16	**$0.66	53.2%**	1.98	35.8%	$74.08	$31.23	$26.70	13.5	37.4	15.8	0.38
Dec-16	**$0.29	53.2%**	2.08	38.4%	$77.87	$32.82	$26.70	12.8	37.4	15.8	0.33

The P/E, using today’s price and assuming the March numbers come in as expected, is 15.9, which is just a bit higher than Sketchers profitable low (it hasn’t been this low since it was losing money in 2012).

This is a bit odd for a company growing earnings so fast. Good companies could have bad prices for quite a while. Recalling Tom E’s posts from a while ago, this is the time of year when we see some downside volatility in the share price. Also, the June quarter last year was an outlier and the comps this June will be difficult (analysts expect only 14% QoQ growth).

Here is valuation table assuming $2.08 TTM in December at various P/E ratios and the upside from today’s price:


P/E	15	17.5	20	22.5	25	27.5	30
Price	$31	$36	$42	$47	$52	$57	$62
Growth	17%	36%	56%	75%	95%	114%	134%

The high P/E has exceeded 20 in each quarter since the end of 2012. If the P/E hits 20 on $2.06 of earnings this year, we’ll see over 50% appreciation in the share price.

The business is doing well, earnings prospects going forward are great and the valuation very low. If one wants to buy shares, now is the best time in a long time to do so.

DJ

47 Likes
2

Wow, great points DJ, especially your second to last sentence.

The high P/E has exceeded 20 in each quarter since the end of 2012. If the P/E hits 20 on $2.06 of earnings this year, we’ll see over 50% appreciation in the share price.

That sounds like a pretty good chance, of some pretty high upside, in a relatively short period of time! What anyone would be looking for in an investment.

I just bought some more SKX when it hit back in the $26 range this past week, but I’m going to look again and potentially buy more next week, too.

FWIW, I don’t have near as high of a concentrated portfolio as most here do, I’m still overly diversified (in my more recently changed opinion after following this board for a while), but I am slowly cutting down the number of positions I hold. It’s not even a 5% position yet. I have quite a few larger than 5% positions (BWLD, MIDD, NFLX, AAPL, PRAA, CTRP, etc), but they all grew that way, my original investments were no where near that high.

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I bought more last week too. $ 26.74

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DJ,

I also noted the near-historic low relative valuation… but this:

Also, the June quarter last year was an outlier and the comps this June will be difficult (analysts expect only 14% QoQ growth)

… makes me think that it might be a rough summer. Most analysts don’t really look beyond the current quarter, and the comps matter more than overall growth to those myopic ‘investors’.

I have a smallish position in SKX (~3.5%), and I am watching it closely for signs of life. I think I am going to buy some calls so I can lock in my price before it does rebound, which I expect to happen next fall.

Tiptree, Fool One guide, long SKX

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"Also, the June quarter last year was an outlier and the comps this June will be difficult (analysts expect only 14% QoQ growth)

… makes me think that it might be a rough summer. Most analysts don’t really look beyond the current quarter, and the comps matter more than overall growth to those myopic ‘investors’. "

I read the comp for this quarter should be good but the ones for the following quarter will be difficult.
Do you think the stock would march on higher only after the June quarter is behind us? it might go back up a bit after this one assuming there is no bad news. What do you think?

when are the earnings? this week?

tj

6

tj,

Do you think the stock would march on higher only after the June quarter is behind us? it might go back up a bit after this one assuming there is no bad news. What do you think?

I cannot pretend to know when the market will actually recognize the goodness that is SKX, but I do know that a ‘bad comp’ quarter will likely have an adverse effect. That is why I said I might wait until after the September results are released. But, honestly, that is pure speculation, and really has little merit to even be posted. If you like SKX at today’s prices, there is no reason to hold off if your time-horizon is more than a few months.

Tiptree, Fool One guide, feeling foolish for giving un-Foolish advice

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