Columbia Sportswear stock market performance
Despite strong second-quarter results and a guidance update on July 26, Columbia Sportswear (COLM) stock plunged the next trading day. Its stock price fell as much as 11.2% on July 27 before finally closing at $85.38, ~7% below the previous day’s closing price. The company is now sitting at YTD (year-to-date) gains of 18.8%.
Sportswear stocks in general have delivered strong YTD returns this year. Lululemon Athletica (LULU) and Under Armour (UAA), for instance, have gained 53% and 43%, respectively, so far. Nike (NKE) is also sitting at a YTD profit of 19%.
All the above sportswear stocks have outperformed the broader S&P 500 Index (SPX) with returns of 5.4% and the S&P 500 Apparel and Accessories Index with returns of 17% YTD. Skechers (SKX), however, has fallen around 26% to date, mainly due to disappointing guidance and weak results this year.
Valuations and earnings potential
Columbia Sportswear is currently trading at a one-year forward price-to-earnings ratio (or PE) of 25x versus a three-year average of 22x. It’s operating close to the middle of its 52-week PE range of 19.6x to 27.6x.
The company continues to trade at a discount to Nike at 29x, Under Armour at 85x, and Lululemon at 36x. Skechers (SKX), however, is even cheaper and trades at 15x.
However, all the companies that are expensive compared to Columbia Sportswear also have better short-term earnings upside. While COLM’s earnings are predicted to fall ~2% over the next 12 months (or NTM), Lululemon’s, Nike’s, and Under Armour’s NTM EPS are projected to increase ~17%, 10%, and 74%, respectively. Skechers EPS is, however, likely to decline 4% during the period.
In the next section, we’ll discuss recent analyst actions on COLM.