Nasdaq
华尔街日报Deckers Outdoor Corporation (NYSE:DECK) Stock Catapults 26% Though Its Price And Business Still Lag The Market
Deckers Outdoor Corporation (NYSE:DECK) shareholders are no doubt pleased to see that the share price has bounced 26% in the last month, although it is still struggling to make up recently lost ground. But the last month did very little to improve the 51% share price decline over the last year.
In spite of the firm bounce in price, Deckers Outdoor may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 14.9x, since almost half of all companies in the United States have P/E ratios greater than 20x and even P/E's higher than 34x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.
With earnings growth that's superior to most other companies of late, Deckers Outdoor has been doing relatively well. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.
See our latest analysis for Deckers Outdoor
How Is Deckers Outdoor's Growth Trending?
In order to justify its P/E ratio, Deckers Outdoor would need to produce sluggish growth that's trailing the market.
Retrospectively, the last year delivered an exceptional 19% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 152% in total over the last three years. So we can start by confirming that the company has done a great job of growing earnings over that time.
Turning to the outlook, the next three years should generate growth of 6.1% each year as estimated by the analysts watching the company. With the market predicted to deliver 11% growth per annum, the company is positioned for a weaker earnings result.
With this information, we can see why Deckers Outdoor is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.
The Bottom Line On Deckers Outdoor's P/E
Deckers Outdoor's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.
We've established that Deckers Outdoor maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.
Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for Deckers Outdoor with six simple checks on some of these key factors.
You might be able to find a better investment than Deckers Outdoor. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.