Assessing Deckers Outdoor’s Value After 5% Jump on Strategic Partnership News

• Thinking about whether Deckers Outdoor is a hidden bargain or just fairly priced? You are not alone, and understanding its true value requires more than just a glance at the share price.
• Despite a rough ride in 2024 with a year-to-date drop of 57.4%, the stock jumped 5.0% over the last week, showing signs of renewed investor interest.
• News of strategic partnerships and a fresh product launch have caught analysts’ eyes and may be fueling optimism, even as industry-wide supply chain challenges continue to make headlines. This recent context helps explain the stock’s volatility as investors weigh both the opportunities and potential risks.
• Deckers Outdoor currently scores a 4 out of 6 in our valuation checks, suggesting there are undervalued aspects worth digging into. Up next, we will break down how Deckers stacks up with traditional methods like discounted cash flow and multiples. Stick around, because the most insightful valuation approach comes at the end of the article.

Find out why Deckers Outdoor's -54.5% return over the last year is lagging behind its peers.

Approach 1: Deckers Outdoor Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's intrinsic value by projecting its future cash flows and discounting them back to today. This approach reflects what those future dollars are worth in present terms. For Deckers Outdoor, analysts have provided cash flow projections for the next five years, and Simply Wall St extends these estimates even further for a clearer long-term outlook.

Currently, Deckers Outdoor generates Free Cash Flow (FCF) of around $961 million, with analyst projections expecting this to climb to $1.04 billion by 2030. The cash flows over the coming decade gradually increase, indicating steady, if not spectacular, anticipated growth. These numbers are all denominated in U.S. dollars.

Based on these projections, the DCF fair value for Deckers Outdoor comes to $105.35 per share. Given the current market pricing, this method implies the stock is 17.2% undervalued. This suggests that the recent selloff may have overshadowed the company’s true earning power.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Deckers Outdoor is undervalued by 17.2%. Track this in your watchlist or portfolio, or discover 927 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Deckers Outdoor.

Approach 2: Deckers Outdoor Price vs Earnings (P/E) Analysis

The Price-to-Earnings (P/E) ratio is a widely used valuation metric for established, profitable companies like Deckers Outdoor. It measures how much investors are willing to pay for each dollar of a company’s earnings, providing a quick snapshot of market sentiment and expectation.

In simple terms, companies with higher growth prospects or lower risk tend to trade at higher P/E ratios. Conversely, a lower P/E may reflect slower growth or greater uncertainty. What is considered a "fair" P/E depends on the company’s growth outlook, profitability, and risk profile, as well as how it compares to industry standards.

Deckers Outdoor currently trades at a P/E of 12.51x. For context, this is well below both the Luxury industry average of 20.18x and the broader peer group’s average of 38.14x. However, raw comparisons can be misleading, as they may not fully account for company-specific growth, risk, or profitability differences.

This is where Simply Wall St's "Fair Ratio" comes in. The Fair Ratio, calculated to be 15.41x for Deckers, represents the multiple that best fits the company’s earnings growth, margins, industry, size, and risk profile. Unlike peer or industry comparisons, the Fair Ratio is tailored to Deckers’ own characteristics, making it a more meaningful benchmark for valuation.

Deckers Outdoor's current P/E is very close to its Fair Ratio, suggesting that the market is pricing it in line with its fundamental outlook.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1433 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Deckers Outdoor Narrative

Earlier, we mentioned there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is a simple, powerful way for investors to connect their perspective on a company, such as its future revenue, earnings, and margins, to a financial forecast and a fair value estimate. Rather than just looking at numbers, Narratives help you tell the story behind your investment thesis. This makes it easier to clarify your reasoning and see how changes in the business, industry, or market could impact potential value.

Narratives are accessible right on Simply Wall St's Community page, used by millions of investors. Here, you can craft your own view of Deckers Outdoor and compare it to other investors’ outlooks as well as analyst consensus. This provides context to differences in opinion about fair value. By directly linking your story to a calculated fair value, Narratives make it much easier to decide when a stock might be under- or over-valued relative to its current price.

Best of all, Narratives update dynamically whenever fresh news or earnings results come in, helping you keep your decisions responsive and relevant. For example, Deckers Outdoor investors currently have Narratives ranging from a bullish target of $158.00, reflecting strong faith in brand growth and management execution, to a more cautious view at $97.00, factoring in risks like slower sales or margin compression. Both approaches yield distinct fair values and buy or sell triggers.

Do you think there's more to the story for Deckers Outdoor? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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