SKX is it a good buying opportunity?

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1

There were a few discussions about latest SKX stock meltdown.
I think I identify the reason.
http://seekingalpha.com/article/3624176-skechers-hit-hard-by…

Skechers: Hit Hard By Uncertainty About Growth

Also there is 5 year prediction for SKX growth which is -25% negative growth:
http://money.cnn.com/quote/quote.html?symb=SKX

If ones look at Yahoo and FINVIZ we can see still a healthy growth for the next five years:
http://finviz.com/quote.ashx?t=SKX&ty=c&ta=1&p=d…
20% year over year which is pretty good.
Also Yahoo has a good growth rate:
http://finance.yahoo.com/q/ae?s=SKX%2C+&ql=1
20% again.
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:

http://www.cnbc.com/2015/10/23/skechers-exec-to-cramer-we-wi…

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…

Conclusion
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.

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2

Small (or maybe big) correction:
The price to guarantee a double is:
$32.8102641211 per share.
If you require a 50% MOS then the price should be 16.32.

Corrected Conclusion

There is uncertainty about the growth rate of SKX. It is driving the stock down.
If you believe the CFO then the stock price should be 32.80 to expect a 15% annual return.
The stock price these days is around $25 so we have already some MOS.
If you require 50% MOS then one should wait for the price to go down to 16.32.
For me, I’ll start accumulating at any price below $20.
Sorry about the confusion. I hope I made things clearer now.

3

Yes, but the other thing to consider is that no CFO in their right mind would predict 50% CAGR for the next 5 years no matter what they believed to be the most likely case. Far, far better to be grossly wrong on the underside than on the upside.

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