RE: DECK
They have been on my radar for a while and the price keeps dropping. Mr. Market seems to not like them very much.
EBITDA has compounded at 34.89% since 2020 going to $1,248.45M. If they can maintain even a 12% compound growth in their earnings potential in five years that puts EBITDA around $2,200.19M. Current EV/EBITDA is at the low end for this retailer at ~8.8x and if they get back to a normalized level of 13x (low end in my view for a premium brand like this) then I have a share price around $127.71-139.75 with a 10-12% discount rate. This is a 53.63%-68.11% increase from where the price is today at around $83.13. This also assumes they keep up with the repurchase program and shares decline 2% a year in that time.
Company has strong brands with UGG, Hoka, TEVA, and AHNU. The fear is weak consumers and tariffs are going to eat the brand, but they keep holding up.
They're sitting on $1,414.48M in cash and equivalents and more impressive NO DEBT. Leases makeup the majority of their liabilities but there's no bonds, term loans, or banks involved here. FCF last year was $958.35M with core cash flow at $996.55M.
Low CAPEX business with CAPEX/Sales being 1.5% in 2020 and 1.7% in 2024. D&A is only 5.56% of EBITDA leaving 94.44% for EBIT.
They've been buying back stock for multiple years with $297M in 2023, $415M in 2024, and $567M in 2025. SBC is only 0.8% of sales in 2024 and was 0.7% of sales in 2020.
I think the equity is undervalued today, but I don't see a clean entry for me just yet. Technicals (taboo!) are not setup for a clean entry and the consumer space may not see a proper valuation for a bit given the sentiment at the moment. I will try and wait for my price to appear and then make an entry.
Happy investing,
Sean |
