UGG, Teva maker bucking the recession?

Posted Jan 7th 2009 7:10PM by Jamie Dlugosch
Filed under: Earnings Reports, Bargain Stocks, Stocks to Buy, Recession

One stock that I think has traded irrationally is Deckers Outdoor Corp. (NASDAQ: DECK).

Shares of the UGG and Teva footwear company had fallen to $80 per share in late October, but lost nearly 50% of its value from there in November.

Considering that the company increased guidance on Oct. 23, this move made little sense.

When I last wrote about DECK in July, shares were trading for more than $100, but well off their highs above $160. At that time, I suggested that investors resist the urge to buy the beaten-down stock, no matter how tempting.

It wasn't that I didn't believe in the potential of the company. Instead, the macro picture being as it was at that time suggested waiting for a better entry point. I thought below $80 would make sense.

I was right about waiting, although I did not think the stock would sink to less than $50 as it did in late November. Obviously something was amiss given that DECK's performance was quite stellar.

This is a growth company in a very poor retail environment and, yet, it is still performing. The stock deserves a medal of honor for doing so if you ask me.

In the announcement in late October, Deckers stated that fourth-quarter revenue and earnings would increase by 52% and 44%, respectively. Analysts expected the company to make $3.84 in the period.

Today analysts expect earnings of $3.92 reflecting the increased guidance. It remains to be seen if the company can meet these expectations, but the mere fact that they could raise guidance in the middle of a storm has to be encouraging.

The stock has recovered from the irrational lows, but still trades for less than $80 per share.

Is Deckers a buy at these prices?

For those that like pictures, a nice reverse head-and-shoulders is forming over the last year in Deckers trade. Such a feature suggests a bullish future.

If the company does indeed make the slightly more than $7 per share in 2008, you are buying the company for just over 11 times trailing earnings. With growth expected in 2009 at 14%, I would view current prices as a bargain.

Jamie Dlugosch is a contributor to InvestorPlace.com.

Tags: retail, retail stocks, retailers, RetailStocks, shoes, teva, tevas, ugg, ugg boots, UggBoots, uggs