Deckers Outdoor Stock: 3 Reasons to Buy and 1 Reason to Sell

Deckers Outdoor (NYSE: DECK) isn't the most descriptive name for the company that owns the Ugg and Hoka shoe brands, among others. But once you understand its products, you might find this footwear company a bit more attractive. And there are three good reasons to consider buying it today. But also think carefully about the one important reason to sell or avoid the stock before you become a long-term investor.

What does Deckers Outdoor do?

You already know that Deckers Outdoor makes footwear. The company's two largest brands are Ugg and Hoka. These two brands account for 68% and 29% of the top line, respectively.

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Deckers also breaks out its Teva brand, which is relatively small, and its "other" category rounds things out to 100% on the top line of the income statement. So, basically, Deckers is a footwear company with two main brands. And the big reason to worry about the company's long-term future is that those two brands are largely driven by consumer trends. Uggs is a fashion brand, and these buyers can be very fickle. Hoka might be considered a sports shoe, but even in this case, mercurial consumer buying trends play a big role.

The reliance on fashion products is the big reason why investors might want to pass on Deckers Outdoor. Fashion-based apparel makers can quickly find themselves on the outs and, when that happens, revenues and earnings can plunge. A company's stock price will usually follow along for the ride.

To be fair, investors are probably paying more attention to tariff issues right now, given that Deckers Outdoor produces a lot of its shoes in Asia. That issue is very real, and uncertainty is high right now, but production can be shifted and this issue is likely to pass in time. It would be a much bigger problem if consumers just stopped buying the company's shoes, regardless of where they are produced.

There are reasons to like Deckers Outdoor

That negative view of Deckers' business model is realistic, but it doesn't take into account some very clear positives. For example, in the third quarter of fiscal 2025 the Ugg brand experienced impressive sales growth of 16.1%. But Hoka did even better, with a sales advance of 23.7%. Basically, Decker Outdoor may only have two key brands, but they are both resonating well with consumers today.

The next big thing to consider is Deckers' balance sheet. Rock solid would be an understatement given that the company has no long-term debt. The story here gets even better, though, because Deckers has no debt and $2.2 billion in cash. There's a fashion risk here, but this footwear company has the financial wherewithal to survive through hard times.

DECK PE Ratio data by YCharts

And, on top of those two facts, the stock looks reasonably attractive valuation-wise. The price-to-sales ratio is only slightly above its five-year average. The price-to-book value ratio is basically in line with its longer-term average. And the price-to-earnings ratio is notably below its five-year average. Basically, Deckers Outdoor stock looks reasonably priced, and perhaps a little cheap today.

For more aggressive investors, or those with a shorter time horizon, Deckers' stock could be an interesting growth story. Just go in knowing that fashion trends can change quickly.

Should you buy Deckers Outdoor?

Deckers Outdoor is going to be something of an acquired taste. There's no dividend, so income investors won't want to buy it. The valuation is interesting, but the stock is not super cheap, so value investors will likely want to take a pass, too. Growth investors are going to be most interested in Deckers, given its strong Ugg and Hoka brands and its reasonable valuation. But only buy it if you recognize, and can stomach, the risks associated with fashion stocks.

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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Deckers Outdoor. The Motley Fool has a disclosure policy.