Down 48%, This Growth Stock Looks Like a No-Brainer Buy

Key Points

• Over its history, Deckers has been a top performer on the stock market.

• The stock plunged early in the year on fears of tariffs and weakening consumer sentiment.

• The company's first-quarter numbers showed off surging international growth.

• 10 stocks we like better than Deckers Outdoor ›

Deckers Outdoor (NYSE: DECK) has been quietly been one of the best-performing stocks on the market over its history, returning nearly 10,000% since its 1993 initial public offering (IPO).

In recent years, the footwear company's success has been driven by the growth of two brands, Hoka and Ugg, known respectively for running shoes and sheepskin boots.

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Deckers, which acquired both of those brands when they were just start-ups, has proven itself to be a savvy brand manager, scaling up each brand through marketing, manufacturing, and distribution. And it's achieved industry-leading gross margins, approaching 60%.

However, the stock has struggled more recently, diving this year amid concerns about slowing growth and tariffs. Even after a strong first-quarter earnings report last week, shares are still down 48% from their peak earlier this year.

That sell-off presents an excellent buying opportunity. Let's take a closer look at why.

Image source: Getty Images.

1. The sell-off seems to be an overreaction

Sustaining a growth rate of 20% or higher over a long period of time is difficult for any consumer brands, so some skepticism about the sustainability of brands like Ugg and Hoka is understandable. However, that reached a fever pitch after the company's earnings report in April, for the fourth quarter of its fiscal year 2025: Overall revenue growth slowed to 6.5%, including 10% growth in Hoka and 3.6% growth in Ugg.

At that time, management refused to give full-year guidance due to macroeconomic uncertainty related to global trade policies. It did give a weak forecast for the first quarter, calling for revenue of $890 million to $910 million.

The company just blew past that guidance, with revenue of $964.5 million in the first quarter. Its bottom-line result of $0.93 in earnings per share (EPS) was also much better than its guidance for $0.62 to $0.67.

First-quarter growth was driven by strength in the international market and the wholesale channel. However, second-quarter guidance was once again muted due to uncertainty around trade; it calls for 7% revenue growth at the midpoint of its range of $1.38 billion to $1.42 billion, and EPS of $1.50 to $1.55, down from $1.59 in the prior-year quarter.

Deckers has beaten analysts' EPS consensus by double-digit percentages in each of the last four quarters, a good indication that its guidance could prove to be conservative once again. While there's still uncertainty, Deckers' momentum seems stronger than investors believe.

2. The stock looks cheap

Even after jumping 12% on its first-quarter report on Friday, Deckers still looks like a good value. The stock is trading at a price-to-earnings (P/E) ratio of 18, more cheaply than a number of its peers in the footwear and apparel sector -- not to mention the S&P 500, which is trading at a P/E of 28.

Essentially, that means that investors expect the company to grow at less than two-thirds the pace of the broad market over the long term. But that seems like a mistake, given that Deckers just reported 17% revenue growth in the first quarter with 20% growth in Hoka and 19% at Ugg. Additionally, Deckers has a strong balance sheet with no debt and $1.7 billion in cash, equivalent to about 10% of its market cap.

The company is also taking advantage of the discount in its stock price by buying back shares. Over the last four quarters, Deckers has reduced its shares outstanding by nearly 4 million, or 2.5%. In the most recent quarter, it bought back 1.7 million shares, and it has $2.4 billion remaining under a repurchase authorization.

3. The international market is strong

Peers like Nike make the majority of their sales in international markets, and Deckers seems to be on its way to doing the same. In the first quarter, international sales made up nearly half of its revenue, growing 49.7% to $463.3 million.

Management credited strong performance in the Asia-Pacific and Europe, Middle East, and Africa (EMEA) regions, including at its owned stores in China. There's also been a strong response to the new Hoka Arahi 8 model, which the company said had achieved double-digit weekly sell-throughs since launch in EMEA -- meaning stores are selling more than 10% of inventory each week -- and significant volume gains in China.

This strength outside the U.S. should give investors some confidence that Deckers Outdoor can overcome any volatility in the U.S. related to tariffs. At the current price, the stock looks like a good bet to outperform, especially after the strong first-quarter earnings report.

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Jeremy Bowman has positions in Nike. The Motley Fool has positions in and recommends Deckers Outdoor and Nike. The Motley Fool has a disclosure policy.