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Cheaper Than Nike There are many investors who remember the toning fad in 2009 2010, as Skechers (NYSE:SKX) hit its then all time high of $44.90 per share. When the fad faded, the stock fell to sub $15 per share within a nike careers year. There is fear of a repeat when slowing growth is mentioned or even hinted. This was on full display when the company released its Q3 earnings. Despite beating astronomically high top and bottom line nike elite estimates by more than 7% on the back of 30% y/y overall sales growth, 60% y/y international sales growth and higher gross margins, the stock plummeted over 8%. Some investors are looking for any reason to take profits and run, which includes using "it has run up a lot in a short period of time" as justification. Taking profits is fine, but make sure your actions support your goals. It is important to understand that the current growth cycle isn't a fad. Unlike in 2009 2011, there are no outrageous claims that walking in Skechers' shoes will be a workout that tones your muscles. The company is simply offering a wide variety of styles catering to different tastes. The only defining characteristic, comfort, is not going away anytime soon. Let's compare Skechers to some of its peers: Wolverine World Wide Inc. (NYSE:WWW)Nike Inc. (NYSE:NKE) Adidas AG (OTCQX:ADDYY) Under Armour, Inc. (NYSE:UA) Skechers' revenue growth in 2014, at 27%, is higher than its similar sized peers Wolverine and Deckers. It is also higher than the far bigger and more athletic wear based competition in Nike and Adidas. The only one with a higher revenue growth rate is Under Armour at 30% for the year. In 2015, based on estimates, Under Armour grows revenue the fastest, with Deckers coming in second and Skechers third. Next, let's look at how this translates to the bottom line: With earnings expected to grow 29% from $2.73 per share in 2014 to $3.51 per share in 2015, Skechers is the cheapest among the group comparative to its share price (PEG = 0.7). Despite its reputation as an athletic wear company, Nike is actually quite comparable to Skechers as it derives more than 50% of its revenue from footwear. I like nike 1s Nike and its fundamentals, especially after it blew away estimates in its most recent quarter. It has strong growth potential internationally and has managed to stay current on developing trends for decades. But does it deserve a P/E ratio almost 2X its projected earnings growth of 12%? I think it does. Health and fitness is on the uptrend and so is comfort. Similarly, Adidas and Under Armour are both priced at PEG of more than 2. This makes Skechers' undervaluation even more puzzling, as the company has made a strong move into the lucrative athletic footwear space. Recently, its investment paid off, culminating in Meb Keflezighi winning the Boston Marathon in his Skechers GORun in April 2014 and following this with a fourth place finish in the New York Marathon in November 2014. If we view Skechers as a hybrid casual/athletic footwear company and apply the midpoint between Deckers, a casual footwear company, and Nike, an athletic footwear company, then its PEG should be 1.4. This yields a share price of $109, a 89% upside from current levels. Even if the PEG ratio moved to just 1.0, the stock price would be $78 per share, a 35% upside from current levels. Skechers has strong financials to support continued growth: Cash balance of $415 million compared to long term debt of $110 million. YTD 6 month operating cash flow of $74 million compared to capex of $24 million and interest payments of $6 million. Management has a history of guiding conservatively, which means there is upside to earnings as well. SportScanInfo, a website run by a consulting group, provides weekly retail data compiled from surveys of thousands of stores. Skechers is among the brands tracked with data for sales, selling prices, market share, general retailer feedback, etc. There are many catalysts for price movement in the coming months, including the weekly retail surveys by SportScan, so I expect some volatility. Ultimately, there will be upward price action as I think many will really be surprised when the company releases positive Q4 2014 results and carries the growth momentum into Q1 2015.