It may be comfortable to walk around in the company's sandals, but shares of Birkenstock (BIRK +0.64%) have given investors an uncomfortable up-and-down ride over the past year. As of this writing, the stock is down about 8% over the last 12 months. But it's been up as much as 15% from its price one year ago. And it's been down as much as 34% from its 52-week highs.
Sentiment is one of the strongest drivers of a stock's price over the short term. And one year is indeed a short time period when it comes to investing. When it comes to Birkenstock, the sentiment has certainly oscillated up and down for a variety of reasons.
The biggest single-day drop for Birkenstock stock came way back in last August, after it announced results for its fiscal 2024's third quarter. At the time, it reported Q3 revenue growth of 19%, which is good. But investors expected better. And they haven't liked how its growth rate has steadily dropped over the last few years, as the chart shows.
BIRK Operating Revenue (Quarterly YoY Growth) data by YCharts
One of the biggest single-day gains for Birkenstock stock came in May when it reported financial results for the second quarter of its fiscal 2025. Q2 revenue was up 19% -- the same rate as in Q3 2024 when investors were disappointed. But this time, there was a difference: Management believes its full-year financial results will be at the high end of its financial guidance, which is encouraging.
Birkenstock has gone up and down based on investors' reactions to its financial results. But investors have also been grappling with ever-changing global trade conditions. Almost all shoe stocks dropped as tariff announcements were coming out.
However, according to The Fly, analysts at Evercore said that Birkenstock was one of the "best positioned" apparel companies because its products are assembled in Europe. This helped boost confidence as it started to struggle in April.
NYSE: BIRK
Key Data Points
To encapsulate the past year for Birkenstock, the business continues to grow at a double-digit rate, which is good. And it's well positioned in a topsy-turvy global trade environment. But tariffs are still a source of uncertainty, and its growth hasn't always lived up to hopes. That's led to an up-and-down year for investors.
What should Birkenstock investors do now?
Investors need to have a longer-term perspective. This is true of any stock. But it's especially true of Birkenstock.
Yes, there's heightened uncertainty right now for businesses with a strong international presence. But Birkenstock has been in business for 250 years -- this company has seen worse and will come out the other side with ease.
Birkenstock's business is big today -- it's generated over $2 billion in trailing-12-month revenue. But this revenue is well distributed around the world. In Q2, only 55% of its revenue came from the Americas, which represents all of North and South America, not just the U.S.
In other words, Birkenstock is still a relatively small player in most of its markets and has the opportunity to keep expanding in the U.S., its biggest market.
And in Asia, the opportunity is even more promising, considering Birkenstock only generated 8% of its Q2 revenue in all of Asia. China alone could provide a long-term growth tailwind.
Since 2022, Birkenstock's management has invested to increase the capacity of its business. It spent over $200 million from 2022 through 2024 so that it can double its capacity. In other words, this business is still planning for long-term growth. Quarterly hiccups and uncertain macroeconomics don't change that.
Image source: Getty Images.
The financials for Birkenstock are quite attractive. As of this writing, the company's trailing-12-month operating margin is over 25%, which is among the very best in the industry.
Birkenstock stock currently trades at less than 5 times sales. That valuation is pretty reasonable, assuming it can continue to grow at a double-digit rate and assuming margins remain high. In other words, if management's investments in capacity sustain the current trajectory of the business, this stock could outperform the market over the long term.
One of the biggest risks with shoe stocks is fast-changing consumer tastes. But given its heritage, I doubt Birkenstock will go out of style. Given all these factors, Birkenstock stock could be a good buy today.
