Mike, this comes from years of experience, and admittedly is speculation, but backed by reason and experience.
There are three primary keys for stock multiples in regard to stock valuations and those are (1) growth rate, (2) TAM, which is total addressable market, and (3) is sustainable competitive advantage period.
These work out as well in present value calculations. I utilize a model used by (or at least I use to when I cared to, and still may again in the future) by investment banks (at least one of their models). It has seemed to work, so I have put some confidence in it,when Aiken into account of the holistic environment around it.
The biggest issue with future present value is how confidence one can be that the company will actually grow into that future present value. For this, criteria #3 is the most important. You of course need growth, and you of course need a long enough runway of addressable market so a company can grow into its valuation and then some, but isn’t he end, with a sustainable competitive advantage period, there is no confidence any of this growth will last long enough, or sure enough, to ever benefit shareholders.
Right now companies like FIT and GPRO suffer, not from potential growth, but lack of confidence that they have sustainable advantage.
A company like NIKE can have such a high multiple relative to growth, because its business and brand have earned a very long sustainable competitive advantage period. Investors therefore given it a much lower risk adjusted rate of return required to invest in the company, and ergo, the mathematics works out to rationally give it a much higher multiple than its growth would indicate.
UA I believe has similar factors working for it. The UA brand is something special to behold for such a young company. It is as if it is Nike all over again, just young and fresh with all that growth to come again. Yes, slowing down to 25% growth will readjust valuation assessments, but its multiple relative to growth will remain as it is still perceived, like Nike, to have a very nice sustainable competitive advantage period.
Skechers, when it was stealing market share and becoming the number 2 shoe company in America was building its brand, and the perception began that it too had a brand with long term advantages…more than just slowing growth, is that with Skechers, that perception of a brand with a premium long term sustainable advantage period was damaged when it stopped gaining market share and Adidas fought back.
Instead of Skechers becoming another version (in its own ilk) of a young Nike, Skechers like Keds or many other brands, although not going anywhere, is now perceived as a company that may have difficulty stealing market share going forward and becoming a dominant brand. There is no question that UA and Nike are dominant brands. This gives them long-term sustaianble competitive advantage periods; I think there is also no doubt that Skechers has not achieved that same level of market power, and the stalling of Skechers stealing of more and more market share has been the primary factor behind its loss of valuation multiple.
That is why I say there is a reason UA and Nike have their premium multiples. You can see it in almost every market. The market leaders carry valuation multiple premiums to even their faster growing peers. Mathematically, the biggest factors is #3, the length of the perceived sustaianble competitive advantage period. Nike is like Coke, and UA is perceived as someone who can play in that sort of league. Skechers, once it stopped taking market share, lost the perception that it too might be able to play in that league, and ergo, its multiple fell.
Certainly, if Skechers can grow again, that will help. But more than this, Skechers has to start systematically stealing market share again from Adidas or whomever else they relevantly can take share from. That will increase the Skechers multiple for the above specified reasons that work out mathematically, and also work out analystically through the lense of common sense.
That is my experience with how the market assigns valuation premiums to stocks, and why I believe you see the differences between Nike and Ua (with large valuation multiples) and with Skechers, who once had a large valuation multiple, now having a very puny if non-existent multiple to growth rate.
It is one reason why I like owning market leaders, or companies creating new markets, or otherwise dominating at what they do, they simply get valued at a much higher premium by the market, and remain that way until they no longer are able to be market dominant.
Tinker
