??NYSE:SKX) sports a line of trendy footwear (oxfords,
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The first reason being valuation. The Price to Earnings ratio [P/E] is at an all time high of 26. The average annual p/e ratio has been between 8.5 and 21. When a p/e ratio starts to push upper limits,
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Earnings have been doing very well. Hence the stock doing very well. Coming from a deficit of 31 cents a share in 2003, the company earned 59 cents a share in 2004,
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The company recently raised guidance for 2007. Estimates are for sales to have increased by 34% in the fourth quarter of 2006 and per share earnings doubling from the same period last year. Order backlog was up 29% at the end of 2006. According to recent sales results,
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The company is searching abroad for more growth. International sales, at the wholesale level, were only 16% of total revenues in 2006, about the same as 2005. It’s already selling Skechers directly to retailers in Japan, Western Europe, Canada and through distributors everywhere else. So the pipeline has been built,
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A few other numbers: Return on Equity is a healthy 13%. All insiders own 85.1% of class B stock (voting stock) and 37.5% of the class A stock. Debt is only 20% of capital. Current assets are double current liabilities. Look for sales to grow by 7% a year over the next 5 years while earnings to improve by 31% a year, on average,
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It’s that last number that have investors bidding up the stock. The efficiency potential that Skechers has, when sales increase only slightly while profits jump ahead, is what investing dreams are made of. Investors are always looking for companies that are expanding internally while growing earnings much faster than sales. SKX seems to be one of those. But this is a trendy market. What’s hot today isn’t so tomorrow. Check out Tommy Hilfiger for a recent victim. For the moment,
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