Deckers Commentary: Overextended Valuation and Risky Volatility

2 months ago

Sven Carlin

"So my opinion on deckers is that this is a highly competitive environment. It has flown high, perhaps a little bit too high, and now it's back to the deck. However, we have to see, okay, where is the value? The market is crazy rational, will always overshoot on the upside and overshoot of the downside. And that is where we can find value opportunities. If I look at this, I remember also Sketchers P ratio of seven. I've been following it. And then you get this is the real value private equity. Let's say a 7% free cash flow yield. They would buy also deckers. If there is growth of 10%, I think fair value would be a P ratio of 20 not 12. So in this case maybe this was overshooting but perhaps the trend is there and now we are undershooting that trend."

The speaker provides a detailed commentary on Deckers, noting that while the stock has experienced significant highs, it may now be undervalued relative to its growth potential if normalized to a fair P ratio of 20 rather than its current 12. He underscores the competitive environment and volatility due to fickle consumer preferences, suggesting that the risk-reward profile may not suit his investment criteria.

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