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When Skechers U.S.A. (SKX) - Get Skechers U.S.A., Inc. Class A Report tanked last Thursday after reporting disappointing third-quarter results and a weak fourth-quarter estimate, things looked bleak for the footwear maker.

But with the stock down more than 34% this year and near 52-week lows, risk-taking investors can move in and continue to buy shares on dips. This stock is a smart value play in an overvalued market.

Yes, Skechers had a bad quarter, but the company isn't filing for bankruptcy or facing a massive loss of business either.

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The overall industry landscape looks dismal.

U.S. footwear sales fell 5% in September from a year earlier, and Skechers took a particularly hard beating, missing both earnings and revenue estimates in the second quarter and then repeating in the third quarter, which spooked investors.

Given that comparable sales is a major indicator for health when it comes to retail, the company's increase of 3.2% actually makes that third-quarter report card seem a little less frightening. Rival, TheFinish Line is also expected to post a 3% comparable sales gain.

International wholesale business sales for Skechers was up 18%-plus, and the global retail segment had 16% revenue growth.

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In fact, the company's international arm is possibly its strongest growth area.

Although the fourth-quarter sales guidance of up to $735 million is lower than third-quarter sales of $942.4 million, remember there will always be quarters that miss the mark. In a highly competitive sector where Skechers competes with Crocs,Foot Locker,Rocky Brands and Stephen Madden, a certain ebb and flow is inevitable.

Yes, the fourth quarter has been traditionally sluggish for the company, but the weak guidance does hurt. Investors, however, have to consider the possibility that the stock has been way over-sold.

Despite the negativity, Skechers remains a stable enterprise with long-term growth prospects. The company has no liquidity risk, zero debt, sustained profitability and an international growth trajectory.

Investors who are OK with the obvious risk in the stock should snap up Skecher shares on the weakness.

Skechers is trading in the teens for the first time since late 2014, and the seven analysts offering 12-month price forecasts have a median target of $27, which would represent a 35%-plus gain. It looks like the downside potential in Skechers isn't as intense as many fear.


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The author is an independent contributor who at the time of publication owned none of the stocks mentioned.