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Actionable news in SKX: SKECHERS U.S.A. Inc,

Skechers Is A Long-Term Growth Investment

Summary

SKX has higher near-term and long-term growth potential than NKE, yet trades at a discount across various multiples.

We argue that while NKE does warrant a slightly richer valuation than SKX, the multiples should be comparable given strong trailing and projected SKX growth.

If SKX trades at just 75% the valuation of NKE, that implies 20%+ upside.

We currently identify Skechers (NYSE:SKX) as one of our favorite undervalued growth stocks. The company is supported by secular growth in the athletic apparrel space both domestically and internationally, and has significant sales growth potential as it expands international operations. Despite this strong intrinsic growth, the stock trades at a discount to peers. We argue shares could rebound to their 2015 highs with a strong ER catalyst.

The athletic apparel space at-large has benefited from a secular shift towards greater health and fitness awareness. The trend is seen in Americans working out more frequently, eating more healthily, and wearing athletic clothes for leisure. The result has been strong revenue growth for athletic apparel companies. SKX and Under Armour (NYSE:UA) are growing revenues in the 30% range, while the more mature Nike (NYSE:NKE) is still growing revenues at a mid-single digit to high-single digit rate despite market saturation concerns.

SKX Revenue (Quarterly YoY Growth) data by YCharts

In spite of this growth, SKX is still cheap, especially relative to its more mature, slower-growth peer NKE. Analysts are looking for a lot less growth out of NKE than out of SKX (almost half as much on the topline), but NKE still trades at a significant premium to SKX. Maybe it is because NKE set out an aggressive $50 billion long-term revenue target while SKX...


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