Monday 23 September 2013

Analysis of Deckers

An American niche shoe producer

Company: Deckers Outdoor Corporation

Business: An American outdoor and sports shoe producer with focus on niche markets and nice products. The brands they have are for instance: Teva - a kind of sport sandals, Hoka One One - purely for marathon runners and Mozo - that are for people working in a kitchen. For the rest of the brands please look here.

Active: The are present in the US, Europe and in Asia.

P/E: 17.6

contrarian values of P/E, P/B, ROE as well as dividend
The P/E is slightly to high for being a cheap company but could be fully valid for a strong growth company. The P/B is high with 3.1 which I do not like and this of course leads to that the share is not fitting to the Graham formula. The earnings to sales is very good with 9% and the ROE is close to being excellent with its 17.5%. The book to debt is also great with 2.3 so like a normal American company. When we take a closer look at their growth then that has been excellent! They have grown almost 15.5% per year for the last five years which gives us a motivated P/E of 34 to 38 which means that the shares are definitely undervalued by the market today. Big downside which I do not like is that they pay no dividend and they are obviously pushing every dime into the growth like a growth company also should do.
Conclusion: I find Deckers to be a very interesting company and I have no doubt in that they will continue to grow also in the future because today they are still small. By sitting in niche markets they have also managed to accomplish two things a much higher earnings to sales and less need for being present everywhere in each store. I am very tempted of this company but for my own sake I will not invest due to two reasons. I want dividend and secondly I do not like the high P/B but I can understand if people will invest in this company already today especially based on how the rest of the companies look like.
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