There were a few discussions about latest SKX stock meltdown.
I think I identify the reason.
Skechers: Hit Hard By Uncertainty About Growth
Also there is 5 year prediction for SKX growth which is -25% negative growth:
If ones look at Yahoo and FINVIZ we can see still a healthy growth for the next five years:
20% year over year which is pretty good.
Also Yahoo has a good growth rate:
These are 3 different analysts two of them are seeing bright future for SKX one sees a very dark one.
I couldn’t see the reasoning for the analyst (probably downgrading to strong sell).
So what do I make out of it?
SKX is a growth stock and investors paid a premium for this growth.
Now that there are some serious doubts about the growth the stock is being punished.
I saw an interview with the CFO that claimed that they can double the business in five years:
This imply 15% EPS growth every year.
In the last 5 years the EPS of SKX grew 53% a year.
This means that the growth is slowing down big time!
This is why the stock is being taken to the cleaners.
With 15% growth a year and assuming a PE of 22.5 (1.5 * Growth) the stock price needs to go down to 16.32 in order to guarantee a double in 5 years…
SKX has a uncertainty regards its potential long term growth.
The CFO lately on Cramer said that the expected growth for the next five years is 100% (Which is 15% annual growth).
If we believe the CFO estimate than the stock price needs to go down to 16.32 in order to guarantee a double in the stock price in the next five years.