Back in early May, when Rex Moore recommended shares of shoemaker K-Swiss (NASDAQ:KSWS) in our Stocks for Mom feature, he suggested that the market might have overreacted to concerns about the strength of the business. Since Rex's article was published, the shares are up substantially. The company's third-quarter financial results, announced last week, are a good illustration of why.
Third-quarter sales rose 12% to $136 million, helped in large part by a nearly 56% rise in international business. (International sales made up about a fifth of K-Swiss' top line.) Expanded gross and operating margins, meanwhile, helped drive a big pop in net income. Net profit jumped 37% to $21 million, while earnings per share (EPS) raced ahead even more quickly as the company bought back nearly half a million shares during the quarter.
All told, things look pretty darn good at K-Swiss these days. The balance sheet is strong, with inventories actually down year over year. According to management, the company was able to clear out excess stock without sacrificing margins -- a good indicator of strong demand for its products. K-Swiss, it appears, is competing well with the likes of Nike (NYSE:NKE) and Motley Fool Stock Advisor recommendation Reebok (NYSE:RBK), and has built a financially sturdy, growing, cash-flow-generating operation.
Now management is directing investors to expect full-year sales of between $473 million and $477 million and EPS of between $1.69 and $1.73. The market is currently asking about 15 times the low-end earnings estimate for a share of K-Swiss stock -- much more than the shares commanded back in May -- but the company appears to be on significantly better footing now than it was then.
Fool contributor Dave Marino-Nachison doesn't own any of the companies in this story.
