DECKERS OUTDOOR CORP (NYSE:DECK) Passes Key Quality Investment Screen with Strong Growth and Profitability

DECKERS OUTDOOR CORP (NYSE:DECK) has appeared as an interesting candidate for quality investors after passing the Caviar Cruise stock screen, a method based on finding companies with solid historical results, strong profitability, and good financial condition. This approach focuses on lasting competitive strengths, steady growth, and effective capital use, qualities that match long-term, buy-and-hold investment plans. The screen assesses both numerical measures and business aspects to identify companies that deserve more examination.

Revenue and Profitability Growth

A central part of the Caviar Cruise strategy is the need for continued growth in both revenue and earnings before interest and taxes (EBIT). This confirms the company is not only increasing its sales but also getting better at operational efficiency and profitability over time.

• Revenue Growth (5Y CAGR): 7.83%
  Surpassing the screen’s 5% minimum, this shows steady demand for Deckers’ products, which include popular brands like UGG, HOKA, and Teva.
• EBIT Growth (5Y CAGR): 28.34%
  Much greater than revenue growth, this shows margin improvement and operational scale, meaning the company gains from size or the ability to set prices.

The difference between EBIT and revenue growth is especially important, as it shows that Deckers is achieving higher profitability as it grows, a main characteristic wanted by quality investors.

Return on Invested Capital

Return on invested capital (ROIC) is a key measure of how well a company produces profits from its capital. A high ROIC points to a lasting competitive edge and capable management.

• ROIC (Excluding Cash, Goodwill, and Intangibles): 90.27%
  This very high number is well above the screen’s 15% requirement and puts Deckers with the best in its field. It shows the company’s skill in reinvesting capital at high returns, building long-term shareholder value.

Financial Health and Cash Flow

Financial strength is crucial for quality investments, as it lowers risk and aids continued growth. The Caviar Cruise screen focuses on low debt and high-quality earnings.

• Debt-to-Free Cash Flow: 0.0
  Deckers has no debt, meaning it works with a clear balance sheet and has no payments that could pressure cash flow in an economic slump.
• Profit Quality (5Y Average): 97.21%
  This measure, which matches free cash flow to net income, shows that almost all of Deckers’ reported profits become cash. High profit quality lessens the chance of accounting issues and confirms the company has funds for dividends, buybacks, or new investment.

Fundamental Analysis Overview

Deckers’ fundamental report supports its fit for quality investing. It gets a 7 out of 10 total, with high marks in profitability (9/10) and financial health (10/10). The company does better than most rivals in return on equity, profit margins, and liquidity ratios. While its price is seen as reasonable and not low, this is common for high-condition companies that have a higher price for their advantages.

Qualitative Considerations

Beyond the figures, Deckers shows several business traits that quality investors appreciate:

• Brand Strength: Brands like HOKA and UGG have solid consumer loyalty and the ability to set prices.
• Global Presence: The company works around the world, spreading its revenue sources.
• Resilience: Its product mix has both lifestyle and performance types, which could help it manage economic changes.

Exploring More Quality Candidates

For investors wanting to use the Caviar Cruise method on other stocks, the screen is available here, providing a changing list of companies that meet these strict standards.

Deckers Outdoor Corp. is an interesting example for quality investing, mixing solid numerical measures with business strengths that indicate durability and long-term growth possibility. As always, more personal research is suggested to evaluate price and industry factors.

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Disclaimer: This article is for informational purposes only and does not constitute investment advice. Readers should conduct their own research or consult a financial advisor before making investment decisions.