The Ultimate Growth Stock to Buy With $1,000 Right Now

Deckers Outdoor, owner of brands like UGG and HOKA, has outperformed Nike in recent years, with its stock rising 400% over the last five years compared to Nike's 32% decline. Despite a recent stock tumble following a strong earnings report, analysts anticipate continued growth for Deckers, projecting sales to reach $6 billion next year and earnings to grow at an average annual rate of 15% over the next five years; the company boasts a free-cash-flow margin nearly double that of Nike and holds $2.2 billion in cash with no long-term debt.

Analysis

Deckers Outdoor (DECK) has demonstrated significant outperformance relative to industry giant Nike (NKE), with DECK's stock appreciating 400% over the past five years while NKE declined 32%. Despite a recent share price drop following its previous earnings announcement—even though it beat revenue and earnings estimates and raised full-year guidance—Deckers exhibits strong underlying fundamentals. The company, owner of brands like HOKA and UGG, has continued its growth trajectory post-pandemic, with analysts forecasting sales to reach $6 billion next year. Notably, Deckers generated $1 billion in free cash flow over the past 12 months, representing a free-cash-flow margin of just over 20% of sales, nearly double that of Nike. Financially, Deckers is robust, holding $2.2 billion in cash, zero long-term debt, and no dividend obligations, providing substantial flexibility for reinvestment. The stock's valuation has also become more attractive; its price-to-earnings (P/E) ratio has fallen from over 36 before the last earnings report to 21, which is below the S&P 500's P/E of 24. Analysts project Deckers will achieve an average annual earnings growth rate of 15% over the next five years, suggesting sustained growth potential. However, the article notes that Deckers was not included in a recent 'top 10 stocks' list by The Motley Fool Stock Advisor, which might temper some investor enthusiasm.

Key Decisions for Investors

• Investors should consider Deckers Outdoor's strong growth profile, superior free cash flow margin compared to Nike, and its current P/E ratio, which is at a discount to the S&P 500, as potential buying indicators, especially after the recent stock price correction.
• Monitor the upcoming first-quarter results due May 22 closely, being mindful that market reactions can be unpredictable, as evidenced by the stock's decline after the previous strong earnings report.
• For long-term investors, the projected 15% average annual earnings growth over the next five years and the company's solid financial position with no long-term debt may outweigh short-term volatility concerns.
• Acknowledge that while the article presents a bullish case for Deckers, its absence from a prominent stock recommendation list suggests that due diligence and consideration of alternative investments remain prudent.