2010-04-23 11:14:44
Deckers came out with earnings after my commentary above. It was a big beat:
- Gross margins up 610 basis points.
- Earnings beat by 50%
- Beat on revunue by about 10%.
- Raises guidance by nearly 10%
And the PEG ratio is still very low and it will surely keep its #1 Zacks ranking. Stock is up more than 8% today. We mentioned in our newsletter on Monday that this company was likely to beat earnings estimates and noted a couple days later the strong technical indicators before it shot up 15% over the past couple days. We will likely be featuring Deckers near its next ideal technical entry point in the Daily Alert on our site. May take a while for this to develop.
Brian C Neall
Founder - Tradetobefree.com
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Personally, I never short a stock that tends to beat estimates by a wide margin whose consensus estimates are rising. Historically, this is a very losing short trade. This one is in the top echelons in that category (the Zacks rank is 1). Also, same store sales have been growing very strongly, international sales are going well and the Uggs product line never seems to go out of style. Add to that analysts are saying that boots will be a strong fashion trend this year which will help Deckers a lot and the Uggs boot line.
Add to that a P/E ratio of around 12 with a high expected earnings growth rate. It sells a higher quality product that consumers are gravitating toward as the economy improves. This is showing up in sales numbers for high-end retailers.
Boy, there's a lot of reasons not to short this stock. This is probably one of the least shortable stocks in the market right now given its strong business momentum, low valuation and being in the red hot shoe sector. But then again, who knows? If the company misses, the stock will get hit. However, I think this is unlikely.
Keep in mind I have a soft spot for Deckers. I had this as a top pick a few years ago in our newsletter right before it took off. As I remember it, it was in April of that year. History does repeat itself.
Brian C Neall
Founder - Tradetobefree.com
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