Deckers Outdoor Corporation (DECK), a leader in designing, marketing, and distributing innovative and comfortable footwear, apparel, and accessories, announced that its board approved a six-for-one forward stock split, effective September 16, 2024.

“The trading price of our common stock has risen significantly over the past several years as a result of our strong financial performance and the execution of our strategic plan. We believe effecting the forward stock split will make the shares of our common stock more affordable and attractive to a broader group of potential investors, including our employees, and increase the liquidity of the trading of the shares of our common stock,” stated Dave Powers, President and CEO of DECK.

DECK released solid results to kick off the fiscal year 2025. The company reported first-quarter revenue of $825.35 million, exceeding analysts’ expectations of $806.18 million. Its EPS came in at $4.52, compared to the consensus estimate of $3.47. HOKA and UGG continue to drive solid full-price demand worldwide by offering innovative products that resonate with consumers.

HOKA® brand net sales increased 29.7% year-over-year to $545.2 million. UGG® brand net sales rose 14% year-over-year to $223.0 million. With HOKA and UGG delivering outstanding first-quarter results, Deckers raised the outlook for the full fiscal year. It increased EPS guidance to the range of $29.75-$30.65.

The company continued to expect net sales to increase nearly 10% to $4.7 billion for the fiscal year 2025. Operating margin is expected to be in the range of 19.5% to 20%.

Shares of DECK have surged 4.4% over the past month and 31.5% year-to-date to close its last trading session at $895.37. However, the stock has declined 1.8% over the past six months.

Let’s look at factors that could influence CRWD’s performance in the upcoming months.

Robust Financials

During the first quarter that ended June 30, 2024, DECK’s net sales increased 22.1% year-over-year to $825.35 million. Its gross profit rose 35.7% from the year-ago value to $470 million. Its income from operations grew 87.8% year-over-year to $132.81 million.

Further, the company’s net income came in at $115.63 million and $4.52 per share, up 81.9% and 87.6% from the prior year’s quarter, respectively. As of June 30, 2024, its total assets were $3.31 billion, compared to $3.14 billion as of March 31, 2024.

Solid Historical Growth

DECK’s revenue has grown at a CAGR of 17.1% over the past three years. Its EBITDA has increased at a CAGR of 19% over the same period, and its levered free cash flow has grown at a CAGR of 19.4%. Furthermore, the company’s net income and EPS have improved at CAGRs of 22.8% and 26.7% over the same timeframe, respectively.

Favorable Analyst Estimates

Analysts expect DECK’s revenue for the second quarter (ending September 2024) to increase 9.9% year-over-year to $1.20 billion. The consensus EPS estimate of $7.30 for the current quarter reflects a 7.1% year-over-year improvement. Moreover, the company has topped consensus revenue and EPS estimates in each of the trailing four quarters.

In addition, Wall Street expects the company’s revenue and EPS for the fiscal year (ending March 2025) to grow 12.2% and 9.5% from the previous year to $4.81 billion and $31.93, respectively. For the fiscal year 2026, CRWD’s revenue and EPS are expected to increase 10.6% and 13.5% year-over-year to $5.32 billion and $36.25, respectively.

Elevated Valuation

In terms of forward non-GAAP P/E, DECK is trading at 28.04x, 79.2% higher than the industry average of 15.65x. Similarly, the stock’s forward EV/Sales of 4.48x is 264.7% higher than the industry average of 1.23x. Its forward EV/EBITDA of 20.63x is 110% higher than the 9.83x industry average.

Also, the stock’s forward Price/Sales and Price/Cash Flow multiples of 4.73 and 25.92 are significantly higher than the industry averages of 0.88 and 9.77, respectively.

Accelerating Profitability

DECK’s trailing-12-month gross profit margin of 56.54% is 52% higher than the industry average of 37.19%. Likewise, its trailing-12-month EBITDA margin of 23.91% is 108.9% higher than the 11.45% industry average. Also, the stock’s trailing-12-month net income margin of 18.29% is favorably compared to the industry average of 4.66%.

Additionally, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 41.87%, 28.38%, and 24.55% are considerably higher than the industry averages of 11.47%, 6.18%, and 4.17%, respectively.

POWR Ratings Reflect Uncertainty

DECK’s mixed fundamentals are reflected in its POWR Ratings. The stock has an overall rating of C, translating to a Neutral in our proprietary system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. DECK has an A grade for Quality, in sync with its high profitability relative to its peers. It has a B grade for Growth, consistent with its solid financial performance in the last reported quarter.

However, the stock has a D grade for Value, in sync with its higher-than-industry valuation. Also, DECK has a D grade for Stability. The stock’s 60-month beta of 1.05 justifies its Stability grade.

DECK is ranked #41 out of 58 stocks in the B-rated Fashion & Luxury industry.

Beyond what I have stated above, we have also given DECK grades for Momentum and Sentiment. Get access to all the DECK ratings here.

Bottom Line

DECK’s upcoming six-for-one stock split is expected to boost liquidity and attract a wider range of investors. However, high valuation compared to industry averages may limit the stock’s short-term upside potential. So, investors should weigh the stock’s current premium and volatility against its high profitability and growth trajectory before making a decision.

Amid this backdrop, waiting for a better entry point in DECK seems wise now.

Stocks to Consider Instead of Deckers Outdoor Corporation (DECK)

Given its near-term uncertain prospects, the odds of DECK outperforming in the weeks and months ahead are compromised. However, there are many industry peers with much more impressive POWR Ratings. So, consider these A (Strong Buy) or B (Buy) stocks from the Fashion & Luxury industry instead:

Hugo Boss AG (BOSSY)

J.Jill, Inc. (JILL)

Weyco Group, Inc. (WEYS)

For exploring more A and B-rated fashion stocks, click here.

What To Do Next?

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DECK shares were trading at $878.50 per share on Thursday afternoon, down $16.87 (-1.88%). Year-to-date, DECK has gained 31.43%, versus a 16.45% rise in the benchmark S&P 500 index during the same period.

About the Author: Mangeet Kaur Bouns

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions. More...

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