Is Skechers Correctly Valued? Let’s Discuss
Comparing Skechers’s valuations with its peers’
Skechers (SKX) is currently valued at a one-year forward price-to-earnings ratio (or PE) of 14.7x, lower than its three-year average PE of 16.7x.
Not only is the company cheaper historically, it’s also trading at a discount to most of its sportswear peers. Under Armour (UAA), Lululemon Athletica (LULU), Columbia Sportswear (COLM), and Nike (NKE) are currently trading at PEs of 49x, 26x, 20.5x, and 24.3x, respectively.
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Share price movement
While Skechers is cheaper than most of its peers, it’s been among the better-performing sportwear players in the stock market this year. The company has risen 15% year-to-date (or YTD). In comparison, UAA, COLM, and LULU have fallen 29%, 0.6%, and 6%, respectively. Sportswear giant Nike has also stayed in positive territory. The company is sitting at a YTD rise of 16%.
As we outlined in the previous article, SKX has a better upside compared to all of its above-mentioned peers. The company’s stock price is expected to rise 11% over the next 12 months.
Comparing earnings potentials
Looking to the near-term horizon of the next 12 months, Skechers also has better earnings potential than its peers. Its earnings per share (or EPS) are expected to rise 34% YoY in the next 12 months.
In comparison, LULU and COLM are expected to report rises of 8.8% and 2%, respectively, in their EPS in the next 12 months. Nike and UAA are expected to report falls of 3.2% and 22%, respectively, in their next-12-month EPS.
ETF investors seeking to add exposure to SKX can consider the iShares Morningstar Small-Cap ETF (JKJ), which invests ~0.7% of its portfolio in the company.