Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?

One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Deckers Outdoor Corporation (DECK Quick QuoteDECK - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:

PE Ratio

A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.

On this front, Deckers Outdoor has a trailing twelve months PE ratio of 19.00 as you can see in the chart below:



This level actually compares favorably with the market at large, as the PE for the S&P 500 stands at about 20.16. If we focus on the long-term PE trend, Deckers Outdoor’s current PE level puts it current PE level puts it above its midpoint over the past five years, with the number having risen rapidly over the past few months.

 

Further, the stock’s PE also compares favorably with the Zacks classified Shoes and Retail Apparel industry’s trailing twelve months PE ratio, which stands at 20.70. At the very least, this indicates that the stock is undervalued right now, compared to its peers.

 
We should also point out that Deckers Outdoor has a forward PE ratio (price relative to this year’s earnings) of just 16.77, so it is fair to say that a more value-oriented path may be ahead for DECK stock in the near term too.

P/S Ratio

Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.

Right now, Deckers Outdoor has a P/S ratio of about 1.24, lower than the S&P 500 average, which comes in at 3.12 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.



If anything, this suggests some level of undervalued trading—at least compared to historical norms.

Broad Value Outlook

In aggregate, Deckers Outdoor currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes DECK a solid choice for value investors, and some of its other key metrics make this pretty clear too.

For example, the P/CF ratio (another great indicator of value) comes in at 3.39, which is far better than the industry average of 8.01. Clearly, DECK is a solid choice on the value front from multiple angles.

What About the Stock Overall?

Though Deckers Outdoor might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘A’ and a Momentum score of ‘A’. This gives DECK a Zacks VGM score—or its overarching fundamental grade—of ‘A’. (You can read more about the Zacks Style Scores here >>)

Meanwhile, the company’s recent earnings estimates have been encouraging. The current year has seen five upward estimate revisions in the past sixty days compared to no downward revisions, while the next year estimate has seen three upward and no downward revision in the same time frame.

As a result, the current year consensus estimate has increased 8.9% in the past two months, while the next year estimate has gone up by 13.9%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

Deckers Outdoor Corporation Price and Consensus

This positive trend signifies bullish analyst sentiment, and its Zacks Rank #2 (Buy) indicates robust fundamentals and expectations of outperformance in the near term.

Bottom Line

DECK is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Furthermore, a robust industry rank (among the Top 40%) and a solid Zacks Rank instills investor confidence. However, it is hard to get too excited about this company overall as over the past one year, the Zacks Shoes and Retail Apparel industry has underperformed the broader market, as you can see below:



Despite the poor past performance of the industry, a good industry rank signals that the stock is likely to benefit from favorable broader factors in the immediate future. Add to this the positive estimate revisions and robust value metrics, and we believe that we have a strong value contender in Deckers Outdoor.

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With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

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