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Here’s Why Skechers U.S.A (NYSE:SKX) Has Caught The Eye Of Investors

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It’s common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, ‘Long shots almost never pay off.’ While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

If this kind of company isn’t your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Skechers U.S.A (NYSE:SKX). While profit isn’t the sole metric that should be considered when investing, it’s worth recognising businesses that can consistently produce it.

View our latest analysis for Skechers U.S.A

How Quickly Is Skechers U.S.A Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you’d expect share price to follow earnings per share (EPS) outcomes eventually. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Impressively, Skechers U.S.A has grown EPS by 30% per year, compound, in the last three years. If the company can sustain that sort of growth, we’d expect shareholders to come away satisfied.

It’s often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company’s growth. EBIT margins for Skechers U.S.A remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 20% to US$6.9b. That’s a real positive.

The chart below shows how the company’s bottom and top lines have progressed over time. For finer detail, click on the image.

earnings-and-revenue-history
NYSE:SKX Earnings and Revenue History August 16th 2022

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don’t exist, you can check our visualization of consensus analyst forecasts for Skechers U.S.A’s future EPS 100% free.

Are Skechers U.S.A Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$6.3b company like Skechers U.S.A. But thanks to their investment in the company, it’s pleasing to see that there are still incentives to align their actions with the shareholders. Notably, they have an enviable stake in the company, worth US$318m. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.

Should You Add Skechers U.S.A To Your Watchlist?

For growth investors, Skechers U.S.A’s raw rate of earnings growth is a beacon in the night. With EPS growth rates like that, it’s hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. You should always think about risks though. Case in point, we’ve spotted 2 warning signs for Skechers U.S.A you should be aware of, and 1 of them is concerning.

There’s always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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