Deckers Outdoor Corporation (DECK) Hits Fresh High: Is There Still Room to Run?
Have you been paying attention to shares of Deckers (DECK)? Shares have been on the move with the stock up 12.1% over the past month. The stock hit a new 52-week high of $585 in the previous session. Deckers has gained 44.4% since the start of the year compared to the 9.7% move for the Zacks Retail-Wholesale sector and the 1.5% return for the Zacks Retail - Apparel and Shoes industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on October 26, 2023, Deckers reported EPS of $6.82 versus consensus estimate of $4.41 while it beat the consensus revenue estimate by 14.02%.
For the current fiscal year, Deckers is expected to post earnings of $22.87 per share on $3.98 billion in revenues. This represents a 18.07% change in EPS on a 9.77% change in revenues. For the next fiscal year, the company is expected to earn $25.95 per share on $4.38 billion in revenues. This represents a year-over-year change of 13.45% and 10.04%, respectively.
Valuation Metrics
Deckers may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Deckers has a Value Score of C. The stock's Growth and Momentum Scores are A and C, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 25.2X current fiscal year EPS estimates, which is a premium to the peer industry average of 13.3X. On a trailing cash flow basis, the stock currently trades at 27.5X versus its peer group's average of 7.2X. Additionally, the stock has a PEG ratio of 1.5. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Deckers currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Deckers passes the test. Thus, it seems as though Deckers shares could have a bit more room to run in the near term.
How Does DECK Stack Up to the Competition?
Shares of DECK have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Vera Bradley, Inc. (VRA). VRA has a Zacks Rank of # 2 (Buy) and a Value Score of B, a Growth Score of A, and a Momentum Score of F.
Earnings were strong last quarter. Vera Bradley, Inc. beat our consensus estimate by 175%, and for the current fiscal year, VRA is expected to post earnings of $0.53 per share on revenue of $494.32 million.
Shares of Vera Bradley, Inc. have gained 8.8% over the past month, and currently trade at a forward P/E of 13.57X and a P/CF of 2.49X.
The Retail - Apparel and Shoes industry may rank in the bottom 58% of all the industries we have in our universe, but there still looks like there are some nice tailwinds for DECK and VRA, even beyond their own solid fundamental situation.
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