Skechers USA Inc (SKX) has been going like gangbusters in 2015, and was up as much as 14% in early Thursday trading thanks to another strong earnings report.
That puts SKX stock up an amazing 165% year-to-date, and up nearly 350% since January 2014!
Those gains are great for the bulls who already have a position in Skechers stock — including those who took my recommendation to buy SKX earlier this year. But is there any juice left to be squeezed from this high-flying footwear stock?
I think there is, at least in the short term — and here’s why.
SKX Stock a True Growth Story
Skechers mainly sells footwear wholesale via department stores and shoe stores. And though it does have some limited retail space and an online presence, its reliance on third-party vendors is a plus that allows it to easily scale up and meet demand.
And demand is good, based on SKX stock metrics lately. With “goldilocks” pricing as a not-too-cheap but not-too-premium option for consumers who want comfort and style as well as value, Sketchers has a great brand that continues to shine. It may never be Nike (NKE) or as trendy as high fashion names … but frankly that’s not the point.
Just look at the latest earnings for validation of this strategy: Skechers posted profits of $79.8 million or $1.55 per share, roughly doubling last year’s profits and trouncing expectations of $1.01. And that’s all in the face of currency headwinds overseas and West Coast port disruptions weighing on its supply chain in Q2!
Revenue is also impressive, up 36% year-over-year to $800 million — also handily beating expectations.
SKX stock has been aggressively expanding internationally, and the company reported that its international segment saw sales jump 60%, and now accounts for almost a third of total revenues.
Skechers is true growth story, no doubt about it.
Can Skechers Stock Keep this Up?
Of course, bears like to wring their hands after massive run-ups like this because of valuation concerns. But SKX doesn’t have the nosebleed price-to-earnings or price-to-sales problems that some others do right now.
Consider that, even after this massive run, Skechers stock has a forward price-to-earnings ratio of just 26. That’s a very modest premium for what continues to be impressive growth. The footwear company also trades for about 2.2 times next year’s sales.
Not only is that largely in line with market norms, it also overlook the fact that SKX stock routinely posts profits and sales well above estimates.
There is always a risk of volatility in big momentum names like this, and the same is true for Sketchers. And investors who bought into fad footwear company Crocs (CROX) back in 2011 are probably having cold sweats thinking about the tumble that may be in store should consumer tastes change.
But after another blowout earnings report and what appears to be a very fair valuation, it’s hard to bet against SKX, even after a face-ripping run in the past two years.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not hold a position in any of the aforementioned securities.
