Quiksilver, Inc. (NYSE:ZQK)’s long-term debt is steadily rising, but its cash reserves and free cash flow growth are declining. Although its expenses are steadily declining, the improvement is insufficient to completely offset the other losses.
Quiksilver’s primary competitors are NIKE, Inc. (NYSE:NKE), Adidas and Billabong. Although its competitors offer a wider range of athletic products, they cater to the same demographic of younger, active adults. Let’s see how these four companies measure up to each other fundamentally.
|Forward P/E||5-year PEG||Price to Sales (ttm)||Return on Equity||Debt to Equity||Profit Margin||Qty. Revenue Growth (Y-O-Y)||Qty. Earnings Growth |
Source: Yahoo Finance, March 12.
From this chart we can see that Australian rival Billabong, which had a pretty rough ride over the past five years, is clearly the cheapest stock. However, it is currently approaching penny stock territory for a reason – a lack of profits, negative profit margins and declining revenue growth all indicate that it is in serious trouble. Yet Billabong, which offers surf, skate, snow and sports apparel, has the most similar product line to Quiksilver.
Meanwhile, larger companies NIKE, Inc. (NYSE:NKE) and Adidas have been able to post positive revenue growth, but are also finding it difficult to grow their bottom lines. However, many investors consider Adidas and Nike to be large enough to be lifted by a rising tide in consumer sentiment – while Quiksilver and Billabong may be left behind.
Yet a look at the price performance of these four stocks over the past 12 months reveals an unusual trend – Quiksilver is actually outperforming all of its rivals except for Adidas.
Source: Google Finance, March 12.
The Foolish Bottom Line
Despite the fact the Quiksilver’s stock price has held up better than other athletic apparel retailers over the past year, I wouldn’t recommend investors to buy this stock now. Under new CEO Andy Mooney, the company is still trying to turn itself around by restructuring management, cutting costs and expanding margins.
Yet losses across the world, anemic same-stores sales growth, declining revenue and a lack of profits simply tell me that there are better retail stocks out there, more deserving of your investment.
The article Is Quiksilver About to Surf Into a Tsunami? originally appeared on Fool.com and is written by Leo Sun.
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