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Company Overview: Skechers U.S.A., Inc. (NYSE: SKX) is a designer and marketer of lifestyle footwear for men, women, and children and Skechers Performance footwear for men and women. Its operating segments are 1) Domestic Wholesale, which distributes products through domestic wholesale distribution channels, 2) International Wholesale segment, which sells products to department stores and speciality retail stores through its joint ventures and subsidiaries and 3) Direct-to-Consumer, which offers products through e-commerce, concept stores, factory, and warehouse outlet stores.
SKX Details
Key Takeaways from FY21 (ended December 31, 2021)
Revenues & Operating Profit Key Highlights; Analysis by Kalkine Group
Other Key Takeaways from FY21 results
Recent Developments:
Segment Wise Results FY21
Balance Sheet & Liquidity Position
Key Metrics: In FY21, SKX's Gross and Net margins were 49.3% and 13.0%, higher than 47.6% and 2.8%, respectively, reported in FY20. Its Debt/Equity ratio has been improved to 0.10x in FY21, from 0.30x in FY20.
Leverage Profile; Analysis by Kalkine Group
Top 10 Shareholders: The top 10 shareholders together form around 57.08% of the total shareholding, while the top 4 constitute the maximum holding. Fidelity Management & Research Company LLC and The Vanguard Group, Inc. hold the maximum stake in the company at 14.85% and 9.11%, respectively, as also highlighted in the chart below:
Top 10 Shareholders; Analysis by Kalkine Group
Risk Analysis
Outlook
Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation: SKX's share price has corrected 23.72% over the last nine months. The stock is currently trading close to lower-band of its 52-week range of USD 33.50 to USD 55.87. We have valued the stock using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price with an upside of low twenties (in percentage terms). We believe that the company can trade at a slight premium compared to its peer's average, considering the robust financial performance, significant reduction in debt and growth in number of stores. We have taken peers like Under Armour, Inc. (NYSE: UAA) and PVH Corp. (NYSE: PVH). Considering the strong top and bottom-line performance, solid balance sheet, increase in number of stores, strong margin profile, encouraging outlook, and current valuation, we give a "Buy" recommendation on the stock at the closing price of USD 37.04, up 8.11% as of March 08, 2022.
SKX Technical Chart, Data Source: REFINITIV, Analysis by Kalkine Group
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decision should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above.
Technical Indicators Defined
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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