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 7.8% over the past month. The stock hit a new 52-week high of $956.17 in the previous session. Deckers has gained 42.6% since the start of the year compared to the 10.8% move for the Zacks Retail-Wholesale sector and the 19.8% 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 February 1, 2024, Deckers Outdoor reported EPS of $15.11 versus consensus estimate of $11.4.
For the current fiscal year, Deckers Outdoor is expected to post earnings of $26.87 per share on $4.2 billion in revenues. This represents a 38.72% change in EPS on a 15.76% change in revenues. For the next fiscal year, the company is expected to earn $29.78 per share on $4.66 billion in revenues. This represents a year-over-year change of 10.82% and 10.86%, respectively.
Valuation Metrics
Deckers Outdoor 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 Outdoor has a Value Score of D. The stock's Growth and Momentum Scores are A and A, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 35.5X current fiscal year EPS estimates, which is a premium to the peer industry average of 15.5X. On a trailing cash flow basis, the stock currently trades at 45.4X versus its peer group's average of 9X. Additionally, the stock has a PEG ratio of 1.87. 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 Outdoor currently has a Zacks Rank of #1 (Strong Buy) thanks to rising earnings estimates.
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 Outdoor meets the list of requirements. Thus, it seems as though Deckers Outdoor 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 Tapestry, Inc. (TPR). TPR has a Zacks Rank of # 2 (Buy) and a Value Score of A, a Growth Score of B, and a Momentum Score of C.
Earnings were strong last quarter. Tapestry, Inc. beat our consensus estimate by 12.41%, and for the current fiscal year, TPR is expected to post earnings of $4.23 per share on revenue of $6.75 billion.
Shares of Tapestry, Inc. have gained 0.6% over the past month, and currently trade at a forward P/E of 11.37X and a P/CF of 9.97X.
The Retail - Apparel and Shoes industry may rank in the bottom 73% of all the industries we have in our universe, but there still looks like there are some nice tailwinds for DECK and TPR, even beyond their own solid fundamental situation.
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