1 Extraordinary Stock Sneaking Higher

History is littered with footwear stocks that have met their doom. Among the most prominent examples of recent years is Allbirds, which debuted on the public markets in 2021 and eclipsed $30 per share before plunging lower all the way to today’s price of around $1 per share.

Of course there are other counterexamples of high flying sneaker stocks like Nike that have defied gravity over the decades, established brand moats and never looked back.

The sneaker wars are clearly a tough playing field with just a few big winners and one of those that found success is Skechers, but is it a buy now?

Key Points

• Skechers revenues grew by 18% last year and 36.8% the year prior. In 7 of the past 8 years, the top line has grown.
• Analysts have a price target north of $70 per share while a cash flows analysis is slightly more pessimistic.
• Cash flow, growth and profitability have all been exceptional but valuation is a concern at this time.

Sketchers Growth Is Extraordinary

In 7 of the past 8 years, Skechers executives have managed to report top line growth that would be the envy of many technology firms.

Last year, revenues rose by 18% and the year prior by 36.8%. In fact, the only down year in the past 8 was in 2020, which makes sense as people were cooped up in their homes more than usual. For historical context, in 2013 the top line was $1.8 billion while in the most recent fiscal year the number had ballooned to $7.4 billion.

Perhaps more impressive than the top line is the earnings per share figure that has never been reported in the red in the company’s history as a public enterprise. Over the past 10 years, diluted EPS has risen dramatically from just $0.36 per share to $2.38 per share over the past fiscal year.

During that same time window, balance sheet cash has increased from $372 million to $717 million if you factor in short-term investments to the liquidity pool. The increase in cash reserves hasn’t come at the expense of a ballooning debt either with total debt sitting at just $216 million.

So is it time to buy?

Is Skechers a Good Stock to Buy?

With Skechers up 34% over the past year, eclipsing the pop in the market as a whole, it’s natural to wonder whether a pullback is due and the share price has run past fair value.

As far as analysts are concerned, the answer is not yet with a consensus target of $70 per share placed on the stock according to 12 analysts.

A cash flows analysis provides a little more pause for thought with fair value coming in closer to $65 per share, which is slightly higher than where the share price is trading presently.

The bottom line is Skechers appears to be an attractive stock whose profitability is all but assured this year, however a pullback is likely needed at this time to offer a more enticing margin of safety. Certainly one to keep on the watchlist for a buy-on-the-dip opportunity.