Intrinsic value of Deckers Outdoor - DECK

Previous Close

$82.95

  Intrinsic Value

$42.20

stock screener

  Rating & Target

sell

-49%

Previous close

$82.95

 
Intrinsic value

$42.20

 
Up/down potential

-49%

 
Rating

sell

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of DECK stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -4.53
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  1,790
  1,826
  1,868
  1,916
  1,970
  2,029
  2,095
  2,166
  2,243
  2,327
  2,416
  2,512
  2,613
  2,722
  2,837
  2,960
  3,089
  3,227
  3,372
  3,525
  3,687
  3,858
  4,038
  4,228
  4,429
  4,639
  4,861
  5,095
  5,341
  5,600
  5,872
Variable operating expenses, $m
 
  1,667
  1,705
  1,749
  1,798
  1,853
  1,912
  1,978
  2,048
  2,124
  2,205
  2,291
  2,384
  2,483
  2,588
  2,700
  2,818
  2,943
  3,076
  3,216
  3,364
  3,520
  3,684
  3,857
  4,040
  4,232
  4,435
  4,648
  4,872
  5,108
  5,356
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  1,792
  1,667
  1,705
  1,749
  1,798
  1,853
  1,912
  1,978
  2,048
  2,124
  2,205
  2,291
  2,384
  2,483
  2,588
  2,700
  2,818
  2,943
  3,076
  3,216
  3,364
  3,520
  3,684
  3,857
  4,040
  4,232
  4,435
  4,648
  4,872
  5,108
  5,356
Operating income, $m
  -2
  159
  163
  167
  172
  177
  182
  189
  196
  203
  211
  220
  229
  239
  249
  260
  271
  283
  296
  309
  324
  339
  355
  371
  389
  407
  427
  447
  469
  492
  515
EBITDA, $m
  51
  204
  209
  214
  220
  227
  234
  242
  251
  260
  270
  281
  292
  304
  317
  331
  345
  361
  377
  394
  412
  431
  451
  472
  495
  518
  543
  569
  597
  626
  656
Interest expense (income), $m
  5
  2
  3
  3
  4
  4
  5
  5
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  17
  18
  20
  21
  23
  25
  27
  29
  31
  33
  35
  38
  40
Earnings before tax, $m
  -7
  156
  160
  164
  168
  173
  178
  183
  189
  196
  203
  212
  220
  228
  237
  247
  257
  268
  279
  291
  304
  317
  332
  347
  362
  379
  396
  414
  434
  454
  475
Tax expense, $m
  -13
  42
  43
  44
  45
  47
  48
  50
  51
  53
  55
  57
  59
  62
  64
  67
  69
  72
  75
  79
  82
  86
  90
  94
  98
  102
  107
  112
  117
  123
  128
Net income, $m
  6
  114
  117
  119
  123
  126
  130
  134
  138
  143
  148
  155
  161
  167
  173
  180
  188
  196
  204
  213
  222
  232
  242
  253
  264
  276
  289
  303
  317
  331
  347

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  292
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  1,192
  918
  939
  963
  990
  1,020
  1,053
  1,089
  1,128
  1,170
  1,215
  1,263
  1,314
  1,369
  1,427
  1,488
  1,553
  1,622
  1,695
  1,772
  1,854
  1,940
  2,030
  2,126
  2,227
  2,333
  2,444
  2,562
  2,685
  2,815
  2,952
Adjusted assets (=assets-cash), $m
  900
  918
  939
  963
  990
  1,020
  1,053
  1,089
  1,128
  1,170
  1,215
  1,263
  1,314
  1,369
  1,427
  1,488
  1,553
  1,622
  1,695
  1,772
  1,854
  1,940
  2,030
  2,126
  2,227
  2,333
  2,444
  2,562
  2,685
  2,815
  2,952
Revenue / Adjusted assets
  1.989
  1.989
  1.989
  1.990
  1.990
  1.989
  1.990
  1.989
  1.988
  1.989
  1.988
  1.989
  1.989
  1.988
  1.988
  1.989
  1.989
  1.990
  1.989
  1.989
  1.989
  1.989
  1.989
  1.989
  1.989
  1.988
  1.989
  1.989
  1.989
  1.989
  1.989
Average production assets, $m
  305
  310
  318
  326
  335
  345
  356
  368
  381
  396
  411
  427
  444
  463
  482
  503
  525
  549
  573
  599
  627
  656
  687
  719
  753
  789
  826
  866
  908
  952
  998
Working capital, $m
  662
  378
  387
  397
  408
  420
  434
  448
  464
  482
  500
  520
  541
  563
  587
  613
  640
  668
  698
  730
  763
  799
  836
  875
  917
  960
  1,006
  1,055
  1,106
  1,159
  1,215
Total debt, $m
  33
  36
  42
  48
  55
  63
  72
  81
  92
  103
  114
  127
  141
  155
  170
  186
  204
  222
  241
  261
  283
  305
  329
  354
  381
  408
  438
  469
  501
  535
  571
Total liabilities, $m
  238
  241
  247
  253
  260
  268
  277
  286
  297
  308
  319
  332
  346
  360
  375
  391
  409
  427
  446
  466
  488
  510
  534
  559
  586
  613
  643
  674
  706
  740
  776
Total equity, $m
  954
  677
  692
  710
  730
  752
  776
  803
  831
  862
  895
  931
  968
  1,009
  1,051
  1,097
  1,145
  1,196
  1,249
  1,306
  1,366
  1,430
  1,496
  1,567
  1,641
  1,719
  1,801
  1,888
  1,979
  2,075
  2,176
Total liabilities and equity, $m
  1,192
  918
  939
  963
  990
  1,020
  1,053
  1,089
  1,128
  1,170
  1,214
  1,263
  1,314
  1,369
  1,426
  1,488
  1,554
  1,623
  1,695
  1,772
  1,854
  1,940
  2,030
  2,126
  2,227
  2,332
  2,444
  2,562
  2,685
  2,815
  2,952
Debt-to-equity ratio
  0.035
  0.050
  0.060
  0.070
  0.080
  0.080
  0.090
  0.100
  0.110
  0.120
  0.130
  0.140
  0.150
  0.150
  0.160
  0.170
  0.180
  0.190
  0.190
  0.200
  0.210
  0.210
  0.220
  0.230
  0.230
  0.240
  0.240
  0.250
  0.250
  0.260
  0.260
Adjusted equity ratio
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737
  0.737

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  6
  114
  117
  119
  123
  126
  130
  134
  138
  143
  148
  155
  161
  167
  173
  180
  188
  196
  204
  213
  222
  232
  242
  253
  264
  276
  289
  303
  317
  331
  347
Depreciation, amort., depletion, $m
  53
  45
  46
  47
  49
  50
  52
  53
  55
  57
  59
  60
  63
  65
  68
  71
  74
  77
  81
  84
  88
  92
  97
  101
  106
  111
  116
  122
  128
  134
  141
Funds from operations, $m
  198
  159
  163
  167
  171
  176
  181
  187
  193
  200
  207
  215
  223
  232
  241
  251
  262
  273
  285
  297
  310
  324
  339
  354
  370
  388
  406
  425
  444
  465
  488
Change in working capital, $m
  -1
  7
  9
  10
  11
  12
  14
  15
  16
  17
  18
  20
  21
  22
  24
  25
  27
  28
  30
  32
  34
  35
  37
  39
  41
  44
  46
  48
  51
  54
  56
Cash from operations, $m
  199
  152
  154
  157
  160
  164
  168
  172
  177
  183
  189
  195
  202
  209
  217
  226
  235
  244
  255
  265
  277
  289
  301
  315
  329
  344
  360
  376
  394
  412
  431
Maintenance CAPEX, $m
  0
  -43
  -44
  -45
  -46
  -47
  -49
  -50
  -52
  -54
  -56
  -58
  -60
  -63
  -65
  -68
  -71
  -74
  -77
  -81
  -84
  -88
  -92
  -97
  -101
  -106
  -111
  -116
  -122
  -128
  -134
New CAPEX, $m
  -45
  -5
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
Cash from investing activities, $m
  -45
  -48
  -51
  -53
  -55
  -57
  -60
  -62
  -65
  -68
  -71
  -74
  -77
  -81
  -85
  -89
  -93
  -97
  -102
  -107
  -112
  -117
  -123
  -129
  -135
  -142
  -149
  -156
  -164
  -172
  -180
Free cash flow, $m
  154
  104
  103
  104
  105
  106
  108
  110
  112
  115
  118
  121
  125
  128
  133
  137
  142
  147
  153
  159
  165
  171
  178
  186
  194
  202
  211
  220
  230
  240
  251
Issuance/(repayment) of debt, $m
  -63
  4
  6
  6
  7
  8
  9
  9
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  26
  28
  29
  31
  33
  34
  36
Issuance/(repurchase) of shares, $m
  -12
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -103
  4
  6
  6
  7
  8
  9
  9
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  26
  28
  29
  31
  33
  34
  36
Total cash flow (excl. dividends), $m
  46
  108
  109
  110
  112
  114
  117
  119
  123
  126
  130
  134
  138
  143
  148
  153
  159
  165
  172
  179
  186
  194
  202
  211
  220
  230
  240
  251
  262
  274
  287
Retained Cash Flow (-), $m
  13
  -14
  -16
  -18
  -20
  -22
  -24
  -26
  -29
  -31
  -33
  -35
  -38
  -40
  -43
  -45
  -48
  -51
  -54
  -57
  -60
  -63
  -67
  -70
  -74
  -78
  -82
  -87
  -91
  -96
  -101
Prev. year cash balance distribution, $m
 
  291
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  385
  93
  92
  92
  92
  92
  93
  94
  95
  97
  98
  100
  103
  105
  108
  111
  114
  118
  122
  126
  131
  135
  141
  146
  152
  158
  164
  171
  178
  186
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  370
  85
  80
  76
  71
  67
  63
  59
  55
  51
  47
  43
  39
  35
  32
  28
  25
  22
  19
  16
  14
  11
  9
  7
  6
  5
  4
  3
  2
  1
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Deckers Outdoor Corporation is engaged in designing, marketing and distributing footwear, apparel and accessories for both everyday casual lifestyle use and high performance activities. The Company's segments include operations of its brands, such as UGG, Teva, Sanuk and other brands; wholesale divisions, and Direct-to-Consumer (DTC) business, which includes E-Commerce business and retail store business. The Company sells accessories, such as handbags and loungewear, through domestic and international retailers, international distributors and directly to end user consumers both domestically and internationally, through its Websites, call centers and retail stores. The Company markets its products primarily under three brands: UGG, Teva and Sanuk. The Company's other brands include Hoka One One (Hoka), Ahnu and Koolaburra by UGG (Koolaburra). It has a total of over 150 retail stores across the world.

FINANCIAL RATIOS  of  Deckers Outdoor (DECK)

Valuation Ratios
P/E Ratio 442.3
Price to Sales 1.5
Price to Book 2.8
Price to Tangible Book
Price to Cash Flow 13.3
Price to Free Cash Flow 17.2
Growth Rates
Sales Growth Rate -4.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -35.7%
Cap. Spend. - 3 Yr. Gr. Rate -15.3%
Financial Strength
Quick Ratio 292
Current Ratio 0.2
LT Debt to Equity 3.4%
Total Debt to Equity 3.5%
Interest Coverage 0
Management Effectiveness
Return On Assets 0.1%
Ret/ On Assets - 3 Yr. Avg. 8.4%
Return On Total Capital 0.6%
Ret/ On T. Cap. - 3 Yr. Avg. 9.9%
Return On Equity 0.6%
Return On Equity - 3 Yr. Avg. 10.4%
Asset Turnover 1.4
Profitability Ratios
Gross Margin 46.6%
Gross Margin - 3 Yr. Avg. 46.7%
EBITDA Margin 2.8%
EBITDA Margin - 3 Yr. Avg. 9.7%
Operating Margin -0.1%
Oper. Margin - 3 Yr. Avg. 7%
Pre-Tax Margin -0.4%
Pre-Tax Margin - 3 Yr. Avg. 6.7%
Net Profit Margin 0.3%
Net Profit Margin - 3 Yr. Avg. 5.3%
Effective Tax Rate 185.7%
Eff/ Tax Rate - 3 Yr. Avg. 78.2%
Payout Ratio 0%

DECK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DECK stock intrinsic value calculation we used $1790 million for the last fiscal year's total revenue generated by Deckers Outdoor. The default revenue input number comes from 2017 income statement of Deckers Outdoor. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our DECK stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for DECK is calculated based on our internal credit rating of Deckers Outdoor, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Deckers Outdoor.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of DECK stock the variable cost ratio is equal to 91.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for DECK stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 7.5% for Deckers Outdoor.

Corporate tax rate of 27% is the nominal tax rate for Deckers Outdoor. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the DECK stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for DECK are equal to 17%.

Life of production assets of 7.1 years is the average useful life of capital assets used in Deckers Outdoor operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for DECK is equal to 20.7%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $954 million for Deckers Outdoor - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 31.9 million for Deckers Outdoor is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Deckers Outdoor at the current share price and the inputted number of shares is $2.6 billion.

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COMPANY NEWS

▶ GARP Strategy Update 16.5% Total Return In 4 Months   [Jan-08-18 02:59PM  Harvest Exchange]
▶ HOKA ONE ONE Elite Team Adds Seven Athletes   [09:00AM  Business Wire]
▶ Market Open: January 02, 2018   [10:21AM  CNBC Videos]
▶ This Hedge-Fund Activist Might Be Better Off Passive   [Dec-19-17 05:00AM  Bloomberg]
▶ UGG Boot Shocker   [01:35PM  TheStreet.com]
▶ Sanuk and Surfrider Foundation Announce New Partnership   [Dec-05-17 09:00AM  Business Wire]
▶ Deckers Offers to Refresh Board in 2018   [04:24PM  TheStreet.com]
▶ UGG Maker Deckers Urges Support for Directors   [Nov-19-17 08:00AM  TheStreet.com]
▶ Deckers Outdoor Sees IBD RS Rating Rise To 74   [03:00AM  Investor's Business Daily]
▶ New Strong Buy Stocks for October 31st   [Oct-31-17 11:39AM  Zacks]
▶ Deckers Posts Stronger Performance but Ends Sale Plans   [Oct-26-17 06:22PM  Motley Fool]
▶ UGG Bootsmaker Says It Can't Find A Buyer   [05:53PM  TheStreet.com]
▶ Deckers tops Street 2Q forecasts   [04:59PM  Associated Press]
▶ Deckers Outdoor Gets RS Rating Upgrade   [03:00AM  Investor's Business Daily]
Financial statements of DECK
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