Shares of Skechers
How it got here
Skechers has been on a nice run higher in recent months not because its results have been outstanding, but because they just haven't been as bad as they were a year ago. The company has been able to sell more full-priced items and has seen some slight improvements in its sales comps at its retail stores.
But bouncing back from the abyss doesn't mean the company is raking in profits. Sales were down 11.6% in the most recent quarter to $384 million, and the company still reported a loss of $1.8 million, or $0.04 per share. There's no doubt the bottom line is improving, which is why the stock is up, but the company still isn't making a profit.
The stock also hasn't been a particularly strong performer over the past five years. When comparing to Nike
From a more fundamental perspective, Skechers is behind each of these shoe competitors with lower revenue growth and return on assets.
|
Company |
Price/Book |
Quarterly Revenue Growth |
Return on Assets |
Forward P/E |
|---|---|---|---|---|
| Skechers | 1.3 | -11.5% | -2.8% | 26.2 |
| Deckers Outdoor | 2.6 | 13.1% | 17.6% | 9.5 |
| Crocs | 2.6 | 12% | 12.9% | 9.7 |
| Nike | 4.2 | 12.2% | 12.5% | 16.3 |
Source: Yahoo! Finance.
Even if the company is able to return to a profit, investors are putting a high price on the stock with a forward P/E ratio higher than those of Deckers, Crocs, and Nike.
What's next?
The new 52-week high is more of a dead-cat bounce in my eyes than a sign of great things to come. Skechers is no longer a hot brand, and the company's operations leave a lot to be desired. I think the stock is a risky bet on the company's recovery, and I would stay away.
But the CAPS community disagrees, giving the stock a four star rating (out of five). I guess they have more faith that revenue has stabilized and profits will improve than I do.
Interested in reading more about Skechers? Click here to add it to My Watchlist, and My Watchlist will find all of our Foolish analysis on this stock.
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