Deckers Outdoor Corp (DECK, Financial) has recently shown a notable daily gain of 14.18% and a three-month gain of 17.31%, with an impressive Earnings Per Share (EPS) of 29.29. Despite these gains, the critical question remains: is Deckers Outdoor significantly overvalued? This analysis explores the company's valuation in depth, providing insights into its current market positioning.
Company Overview
Deckers Outdoor Corp designs and markets performance and casual footwear, apparel, and accessories, with leading brands like UGG, Teva, and Sanuk. The company primarily operates through its wholesale business but also benefits from a substantial direct-to-consumer segment, including retail stores and websites. While the majority of sales are in the United States, Deckers Outdoor maintains a global presence with retail locations and distributors across Europe, Asia, Canada, and Latin America. Despite a robust market cap of $26.30 billion, a comparison between the current stock price of $1032.9 and the GF Value of $601.7 suggests that the stock might be significantly overvalued.
Understanding the GF Value
The GF Value is a proprietary measure reflecting the true intrinsic value of a stock, calculated based on historical trading multiples, a GuruFocus adjustment factor from past performance and growth, and projected future business performance. When the stock price significantly exceeds the GF Value line, it suggests an overvaluation, potentially leading to poor future returns. Conversely, prices well below the GF Value line might indicate undervaluation and the possibility of higher future returns. Currently, Deckers Outdoor's stock price far exceeds its GF Value, signaling an overvaluation.
Financial Strength and Stability
Investing in a company with robust financial health reduces the risk of significant loss. Deckers Outdoor's cash-to-debt ratio of 5.63 is better than 82.64% of its peers in the apparel and accessories manufacturing sector, indicating strong financial stability. This is further supported by an overall financial strength rating of 9 out of 10.
Profitability and Growth Prospects
Deckers Outdoor has maintained profitability over the past decade, with an impressive operating margin of 21.63%, ranking better than 95.11% of its industry peers. The company's revenue and EBITDA growth rates are also commendable, further underscoring its strong market position and growth potential.
ROIC vs. WACC: Creating Shareholder Value
Comparing the Return on Invested Capital (ROIC) and the Weighted Average Cost of Capital (WACC) provides insights into how effectively a company is generating returns relative to its costs. Deckers Outdoor's ROIC of 63.85 significantly surpasses its WACC of 11.27, indicating efficient value creation for shareholders.
Conclusion
While Deckers Outdoor (DECK, Financial) displays strong financial health, profitability, and growth, its current market price significantly exceeds its intrinsic value according to the GF Value. Investors should consider this valuation analysis to make informed decisions. For further details on Deckers Outdoor's financials, visit the 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
