Versus Competitors
Over the past five years, Deckers’ stock price has performed fairly poorly against its market peers. Higher-end footwear retailer Steven Madden, Ltd. (NASDAQ:SHOO) has fared the best, while Wolverine World Wide, Inc. (NYSE:WWW) – the parent company of Hush Puppies and Merrell – has been held up by strong demand for its diverse products.
Deckers was only able to outperform long-struggling Crocs, Inc. (NASDAQ:CROX), which faces a similar problem – being overly exposed to a single line of cyclical products. Both Ugg boots and Crocs have also been disparagingly called “broken fads” by the media.
The past twelve months were even worse for Deckers, which lost nearly half its market cap prior to earnings due to increasingly bearish sentiment due to its aforementioned woes balancing price with demand.
But after such a plunge, followed by its post-earnings rebound, is the stock fundamentally attractive versus these peers?
| Forward P/E | 5-year PEG | Price to Book | Price to Sales (ttm) | Debt to Equity | Profit Margin | Return on Equity (ttm) | |
| Deckers | 11.10 | 1.42 | 1.91 | 1.00 | 4.47 | 9.11% | 16.33% |
| Steven Madden | 13.13 | 1.27 | 3.04 | 1.55 | No debt | 9.75% | 21.72% |
| Wolverine Worldwide | 13.30 | 1.61 | 3.13 | 1.23 | 194.19 | 4.92% | 13.22% |
| Crocs | 8.80 | 1.00 | 2.18 | 1.19 | 2.36 | 11.69% | 23.68% |
| Best Value | Crocs | Crocs | Deckers | Deckers | Steven Madden | Crocs | Crocs |
Source: Yahoo Finance
Although Crocs is the most undervalued of the bunch, Deckers comes in at a close second, with low debt and strong profit margins. As we can see in the next chart, it also has little trouble keeping revenue growth chugging along.
DECK Revenue TTM data by YCharts
However, its bottom line growth looks a bit less dependable, and has been in constant decline since the beginning of 2012.
DECK EPS Diluted TTM data by YCharts
Deckers has posted strong earnings growth over the past five years, but it fails to match Steven Madden’s comparably stable growth, due to the cyclical nature of Ugg boots. The slide at the start of 2012 was exacerbated by its failed attempt to raise prices throughout the year.
The Foolish Bottom Line
Deckers’ most recent earnings are encouraging and suggest robust growth in 2013. However, the company’s key problem is its complete dependence on the Ugg brand, which in turn is dependent on shifting fashion trends and weather conditions. Although Ugg boots have been a fashion trend since the late 1990s, it is far too early to consider the product a timeless one.
To continue growing, Deckers must repeatedly report increasing fourth quarter top and bottom line gains, reflecting positive growth in its Ugg segment – or face dire consequences. Therefore, more diversified footwear retailers – such as NIKE, Inc. (NYSE:NKE), Steven Madden or Wolverine Worldwide – are safer investments than companies like Deckers and Crocs, which are too dependent on sales of single or similar products.
The article For Deckers, it’s Ugg or Bust! originally appeared on Fool.com and is written by Leo Sun.
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