Run With These Stocks!

Ah, summer -- the perfect time for flip-flops and bare feet. As long as we're eschewing uncomfortable footwear, we might as well look around for shoe stocks that might fit our portfolios well.

"The next Nike?" Easier said than done!
Publicly traded companies that specialize in well-heeled consumers can lead an interesting and difficult existence. So can their investors. Just ask folks who invested in faddish Heelys (Nasdaq: HLYS  ) and Crocs (Nasdaq: CROX  ) at their highs several years ago.

However, even though shoe styles and fads can come and go, some shoe companies have had remarkable staying power. Witness footwear behemoth Nike (NYSE: NKE  ) . Its famous "swoosh" could have been a fad, but it's clearly stood the test of time and survived quite well, despite many formidable competitors.

If the shoe fits …
Let's try on a few shoe companies for size:

Company	Profit/Loss (TTM)	Revenue Increase/Decrease (TTM)	Debt-to-Equity Ratio	Trailing P/E
Skechers (NYSE: SKX  )	$102.8 million	13.3%	2.1%	16.5
Crocs	($13.9 million)	3.0%	1.0%	N/A
Deckers Outdoor (Nasdaq: DECK  )	$122.3 million	15.0%	0.0%	15.1

All data from Capital IQ and Yahoo! Finance. TTM = trailing 12 months.

Crocs has fought its way off the endangered list after its frightening fall from grace several years ago. However, we can see that in the past 12 months it still reported a net loss, and its revenue growth was anemic compared to that of its peers. Although Crocs is expected to return to profitability for fiscal 2010, there's a good chance this company's growth will never return to the heady heights of yesteryear.

Of these shoe companies, Deckers and Skechers look like the best bets to me. Deckers is the name behind several brands, including Teva, UGG, Simple, Ahnu, and TSUBO. It has also managed to somehow avoid the kind of one-trick-pony problem that Crocs ran into, even though it still relies heavily on its UGG boots line.

If you glance at Deckers' history of annual revenue and profits, you might also notice that it held up pretty well in 2008 and 2009 -- terrible years for retail in general. Meanwhile, its trailing price-to-earnings ratio looks reasonably cheap, especially when you realize that the company increased per-share earnings by 65% in the past 12 months.

Skechers also has a long history of dealing with the faddishness of the shoe business by continually playing into those fashions, and then moving on to the next hot style. Right now, the company's touting a line of shoes called "Shape-ups," which have been credited with its double-digit revenue increases recently.

Shape-ups are "toning shoes," which supposedly help wearers improve their leg muscles and posture. In these frugal times, perhaps money-conscious consumers are looking for just such a double-duty shoe.

Is the trend your friend?
The trend can be a shoe company's friend, or set its investors up for a terrible fall. Investors should always carefully assess the true staying power of brands, and realize the dangers of shoe fads. Many companies will have to constantly reinvent or improve their styles and brands to keep drawing in dollars from fickle consumers.

Vote for the shoe stock you think has the best long-term growth potential, then tell us why in the comment boxes below.