Skechers U.S.A., Inc. (NYSE:SKX): Secrets For Long Term Investors

Stock market crashes are an opportune time to buy. High quality companies, such as Skechers U.S.A., Inc., are impacted by general market panic and sell-off, but the fundamentals of these companies stay the same. In other words, now is the time to buy strong, well-proven stocks at an attractive discount.

Check out our latest analysis for Skechers U.S.A

Skechers U.S.A., Inc. designs, develops, markets, and distributes footwear for men, women, and children; and performance footwear for men and women under the Skechers GO brand worldwide. Formed in 1992, and led by CEO Robert Greenberg, the company now has 9.00k employees and has a market cap of US$5.5b, putting it in the mid-cap group. Volatility in the market is hardly detrimental to the financial health and business operations of a large, well-established company. Although some monetary and fiscal policy changes may impact some corporate financing decisions and strategy, what we’ve learnt over time is that these companies tend to adapt. And having a strong balance sheet and a history of proven success aids in this adaptability.

NYSE:SKX Historical Debt, April 6th 2019
NYSE:SKX Historical Debt, April 6th 2019

Currently Skechers U.S.A has US$97m on its balance sheet, which requires regular interest payments. This requires the business to have enough cash to meet these upcoming interest expenses. With interest income higher than interest payments, meeting these short-term debt obligations isn’t a problem for Skechers U.S.A. Furthermore, its operating cash flows amply covers its total debt by over 2x, much higher than the safe minimum of 0.2x. And, a given, its liquidity ratio holds up well with cash and other liquid assets exceeding upcoming liabilities, meaning SKX’s financial strength will continue to let it thrive in a fickle market.

NYSE:SKX Income Statement, April 6th 2019
NYSE:SKX Income Statement, April 6th 2019

SKX’s year-on-year earnings growth has been positive over the past five years, with an average annual growth rate of 14%, beating the industry growth rate of -0.4%. It has also returned an ROE of 17% recently, above the industry return of 13%. This continuous market outperformance demonstrates a strong track record of delivering robust returns over many years, raising my confidence in Skechers U.S.A as a long-term hold.

Next Steps:

Whether you’re convinced or not, the key takeaway here is that every stock gets hit in a bear market, but not every stock deserves the blow. When prices are dropping like flies, now is the time to do your research and buy at a discount. Skechers U.S.A tick the boxes in terms of its scale, financial health and proven track record, but there are a few other things I have yet to consider. Below I’ve compiled a list of factors for you to continue your reading before you buy:
  1. Future Outlook: What are well-informed industry analysts predicting for SKX’s future growth? Take a look at our free research report of analyst consensus for SKX’s outlook.
  2. Valuation: What is SKX worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether SKX is currently mispriced by the market.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.