NEW YORK (TheStreet) -- To buy or not to buy, this is the question, or should I say, part of the question.
It seems like
has been in the financial news a great deal this week. It's a hot topic and a hot company with plenty of opinions about its future swirling like water spouts.
First, let me encourage anyone interested in the company as an investment or trading theme to first familiarize yourself with the company's earnings report and forward guidance. You can start by going directly to Nike's
Nike has become the world's leading innovator of athletic footwear, apparel, equipment, and accessory products for men, women, and children.
Many of us think we know what NKE manufactures and sells to the world. But did you know the company sells performance equipment, including bags, socks, sport balls, eyewear, timepieces, electronic devices, bats, gloves, protective equipment, golf clubs, and other equipment designed for sports activities?
It also makes and markets various plastic products to other manufacturers. Since branding and name recognition is such an important aspect of retailing, there's inestimable value in the names it owns and retails.
It offers products under the trademarks of Cole Haan, Converse, Chuck Taylor, All Star, One Star, Star Chevron, Jack Purcell, Hurley, and Umbro. NKE is a star purveyor that sells its products through retail accounts, its own retail stores and Internet sales, independent distributors, and licensees.
On Thursday the stock was trading under its key support level of $100 per share. Towards the close of the trading session its intra-day low was $98.53.
Take a look at the 12-month chart below to see where the next key support level is and where the bottom Bollinger Band is situated. From a technical standpoint that will be the price level to watch.
Notice the share price is below both the 100-day and the 200-day moving averages. This, according to many technical analysts, is a foreboding phenomenon that NKE shares have not experienced since October 2011. Is this a big red flag or just the approach of a good buying point?
As you can also see, each and every time in the past 12-months the stock dipped below both moving averages it rebounded higher (like a Michael Jordan dunk shot during a Nike commercial).
Thursday's $98.53 low on heavy volume must hold or the next key support of around $90 could come into play. The overall stock market conditions and macroeconomic factors could be negatives too.
Maybe it makes more sense to look for the next Nike?
Well, let me remind us that NKE will report its fourth-quarter financial results on Thursday after the closing bell.
The analysts' consensus on the EPS is $1.37. This is an increase from $1.24 a year ago. Revenue estimates are around $6.52B, also an increase from $5.77B a year ago.
It's helpful to note that NKE has met or beaten analysts' estimates for four consecutive quarters. In the last quarter it reported $1.20 EPS, slightly besting analyst estimates of $1.17.
The stock is currently trading around 20 times current earnings and around 17 times forward projected earnings. Not too richly priced until you look at one of its competitors that could be the next Nike.
I'm referring to
. On Thursday DECK was hammered by sellers with the stock hitting a fresh 52-week low of $44.54 intraday, down over 5% for the day.
DECK shares have dropped almost 63% from its 52-week high of $118.90. The volume was heavier than normal and Thursday's decline suggests that short-selling is probably involved.
There's plenty to like about Deckers. The Goleta, Calif., company designs, manufactures and markets footwear and accessories for outdoor activities and casual lifestyle use for men, women, and children.
DECK offers luxury footwear, handbags, apparel, and cold weather accessories under the UGG brand name, which accounted for 87.3% of the company's overall sales in 2011.
For shoppers who like open- and closed-toe outdoor lifestyle footwear, multi-sport shoes, light hiking shoes, amphibious footwear, and rugged outdoor travel shoes, they offer all the above under the Teva brand name.
Their action sport footwear has plenty of room to grow under the Sanuk brand name which they acquired in the middle of 2011.
Deck manufactures and sells high-end casual footwear for men and women under the TSUBO brand name plus outdoor performance and lifestyle footwear under the Ahnu brand name.
Not to miss any segment of the footwear industry they offer work footwear under the MOZO brand name. Look carefully at the company's
website and see if you like the approach and imagery.
They have such major sports figures as New England Patriots quarterback
Tom Brady signed to endorse some of Deck's products.
As Brady was overlooked 10 years ago in the NFL draft and wasn't chosen till the 6th round, DECK is often misunderstood and overlooked as a great company.
The company has no debt, had year-over-year revenue growth of over 20%, but their last quarterly earnings report showed a dismal decline of almost 59%, and investors started dumping and shorting.
Still, diluted earnings per share were a respectable $4.79 and the stock is selling at only 8 times projected forward earnings. Low expectations for DECK already seem to be priced into the stock.
With a PEG ratio (5-year expected) at a lowly 0.59 and the current share price-to-sales ratio of slightly higher then 1, we could categorize this unique company as a value play at these levels.
DECK has a market cap of only $1.7 billion, which may also make them an irresistible takeover target. NKE has a market cap of over $45 billion.
Wouldn't now be a good time for NKE to do a part cash, part stock deal and add DECK's brands to their panoply of great brands and products?
Deckers will have its next quarterly earnings release on July 26th. If it misses like it did last time the stock could plummet further. Last time it missed earnings the stock fell 25% in one day!
Look at this comparative long-term chart of Deckers versus Nike going back to the early 1990's.
If Decker's is going to be the next Nike it's going to have to knock the cover off the ball for many quarters in a row and demonstrate the same leadership brilliance that Phil Knight and his team at Nike have shown.
Insiders own about 6% of the outstanding shares, and on June 14 seven out of eight directors each bought close to $30,000 worth of the stock at $48.61 per share.
The eighth director, James Quinn, purchased almost $46,000 worth at the same share price. Director Rex Licklider is the insider who owns more shares than any other.
As of June 14, Licklider owned 632,000 shares that, at Thursday's closing price, would put the value of his holdings at nearly $28,440,000. Now that's an encouraging example of insider faith.
So put another star in the plus column for DECK, and get to know the company as well as NKE. This story will only get more interesting as earnings season rolls forward, so stay tuned.
At the time of publication the author had no position in the stocks mentioned.