Deckers Brands (DECK)

By both methods, the value today (DCF $222 · Multiples $189) exceeds the market price ($85).

Today — with margin of safety: at $85 trades ~55.4% below its value discounted to today (~$189) — the wide discount we require (≥38%, equivalent to a ~15% annual return); the risk is covered by the margin, not the rate.

At 5 years — Muy infravalorado: the target price ($236) plus dividends yield above the required average return (10%) — the business compounds.

The bridge: the return at 5 years comfortably exceeds the risk-free rate (4.5%) — and the discount reaches the required margin of safety.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($85) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The market discounts less growth (-16.6%/year) than we project (5.5%/year) → if the base case holds, there is margin: perception is more pessimistic than the estimated reality.

That growth implies ~$0.4 bn of owner earnings in year 5 (vs ~$1.3 bn of our base case). It recalculates if the DCF assumptions are edited.

Year-by-year projection of the selected scenario. From each year, two versions of the flow are derived: growth FCF (operating flow − total capex, the cash surplus) and maintenance FCF (the owner earnings: what the business yields if it only sustains its capacity). The flow is returned almost in full (dividend + buyback) or redeployed into the operation, so that EV stays roughly flat and multiples compress because the metric grows, not because of cash accumulation. The valuation is done on Resultado operativo (EV/EBIT). In edit mode, revenue, margins, capex, and exit multiples can be adjusted.

Year 0 is the TTM ended June 30, 2026 (revenue US$5,527bn, operating income US$1,253bn, operating margin 22.67%). The starting point of the base path does not come from the historical trajectory alone (which had been decelerating 18.2%→16.3%→9.8%→7.9% year-over-year) but from the guidance in effect from the 8-K filed July 23, 2026 for fiscal year 2027 (consolidated net sales US$5.86-5.91bn, operating margin 'somewhat better than 21.5%', diluted EPS US$7.35-7.50, effective tax rate ~23%): year+1 revenue growth (~7.5%) replicates the midpoint of that guidance, applied over a rolling twelve-month window (not the calendar fiscal year) because the TTM already incorporates the actual first quarter of FY2027. The guidance carries two anchors and both were used: revenue (7.5% growth) AND operating margin (21.7% in year+1, a compression of ~100 basis points against the 22.67% TTM) — taking only the revenue anchor would have left the margin calibrated against a higher-than-guided profit, the error the method calls conservatism baked into the base in reverse. From year+2 onward, operating margin recovers gradually toward 22.7% by year+5 (just above the TTM), reflecting that the guided compression is largely transitory (tariffs, SG&A investment) rather than structural, without assuming an optimistic margin expansion. Revenue growth decays smoothly from 7.5% (year+1) to 6.0% (year+5, terminal), a defensible rate for a consumer brand with HOKA still penetrating internationally (guided to grow in the low double digits in FY2027) and UGG mature (mid single digits). The tax rate (22.7%) is the real TTM effective rate (TTM tax expense US$297.5M / TTM pre-tax income US$1,312.3M), consistent with the company's ~23% guidance. ROIC: invested capital = equity (US$2,302M, 10-Q June 30, 2026) + debt (US$0, the company explicitly stated it has 'no outstanding debt' in the 8-K) − cash (US$1,603M) = US$699M — a small but legitimate denominator (a debt-free balance sheet with material net cash, not an artifact): the resulting ROIC (~139%) is a genuine property of the capital-light business model (100% outsourced manufacturing, no owned plant), stated here so the figure is not read as an error. The change in working capital (dNWC = −US$0.058bn in the TTM, a source of cash) is derived from the identity OCF = net income + D&A + SBC − ΔNWC using the four actual TTM components (OCF US$1,194M, net income US$1,015M, D&A US$74M, SBC US$47M) — it is not an invented figure, it is the residual that reconciles the actual flow. The share buyback is material (~5%/year revealed: FY26 −4.50%, with the pace accelerating in the first quarter of FY27) and is modeled via `sharesPath` identical across the three scenarios, funded by real owner FCF (fcfLtm US$1.118bn, buybackLtm US$1.230bn — the TTM includes a return of accumulated cash above the current FCF, which the cascade caps; going forward, the company's own guidance earmarks ~80% of FY2027 FCF for buybacks). The exit multiple (EV/EBIT) uses the consumer brand archetype band [12x,16x]: 13.7x in the base case, reflecting exceptional ROIC and healthy terminal growth (6%) tempered by a `narrow` moat (low barriers to entry in footwear/apparel, flagged in the 10-K itself) and some discretionary-consumer cyclicality.

Today's elevated multiple is the price of growth: if the business grows, the entry point cheapens on its own going forward (the metric grows while EV stays roughly flat). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—, so the value curve shows whether value creation is concentrated in the early or the later years. The required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $236 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $85, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $236 in 5 years and a required return of 4.5% annually, the maximum to pay today is $189. Against the current market price ($85), the margin of safety is 55.4% (trades below the maximum → there is margin) and the total return at that price would be 22.8% annually.

• Entry multiple. Trades at a compressed multiple after the 32% drop from the 52-week high.
• Exit multiple. 13.7x EV/EBIT, just below the midpoint of the [12x-16x] consumer brand archetype band.
• Margin guidance. The re-rating depends on the margin compression guided for FY2027 being transitory rather than structural.

Each margin over sales, year by year: historical (solid line) → projection (dotted).

• ✓ ROIC exceeds the cost of capital (~10%)
• ✓ CFROIC backs up the ROIC (106%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Return on capital. ~139% on invested capital that is small by design (no debt, material net cash).
• Cash conversion. TTM free cash flow (US$1.118bn) is consistent with TTM net income (US$1.015bn), with no signs of 'paper' earnings.
• Reinvestment runway. HOKA's international expansion and DTC growth offer a still-ample reinvestment runway.
• Stock-based compensation. SBC equals 0.8% of revenue and 4.2% of TTM free cash flow, immaterial against the alert threshold.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

Deckers' growth is better decomposed by brand than by a single consolidated percentage: HOKA contributes volume and price growing at double digits, UGG contributes mature single-digit growth sustained by its loyal customer base, and the DTC channel (comparable sales +4.6% at constant currency in FY2026, +6.8% in Q1 FY2027) grows faster than wholesale and is structurally more profitable. Total unit sales volume (+6.2% in FY2026) confirms that growth is mostly real demand and not just price mix.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (30-jun-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• HOKA engine. 47% of revenue growing 15.9% year over year in FY2026, guided to low double digits in FY2027.
• UGG maturity. 50% of revenue growing at mid-single digits (8.2% in FY2026).
• Exit of residual brands. 'Other brands' fell 33.9% due to the wind-down of Koolaburra and AHNU, a shrinking drag on the consolidated figure.

• Capital-light model. 100% outsourced manufacturing, no owned plant, capex ~1.4% of revenue.
• Concentration in two brands. HOKA and UGG represent 97.3% of sales; 'other brands' is residual and declining.
• UGG seasonality. Sales concentrated in the third fiscal quarter, though HOKA's growing weight dilutes it.
• Discretionary category. Premium footwear sensitive to the consumption cycle and macro sentiment.

• ✓Leverage (net debt / EBITDA)Net cash $1.6 bn
• –Interest coverage (EBIT / interest)no data
• –Liquidity (current ratio)no data
• ✓Cash quality (CFROIC vs ROIC)CFROIC backs 106% of ROIC
• ✓Value creation (ROIC − 10% bar)+129pp
• ✓Malinvestment test (capex vs incremental ROIC)Capex/D&A 1.0x
• ✓Float / working capitalFrees up cash $0.1 bn (float / negative WC)
• ✓Dilution (SBC % of revenue + shares)SBC 0.9% of revenue

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Debt. US$0 of outstanding debt, explicitly stated in the July 2026 8-K.
• Net cash. US$1.6bn of cash, equivalent to ~14% of market value.
• Buyback capacity. Guidance commits ~80% of projected FY2027 free cash flow without levering the balance sheet.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• Capital allocation. Consistent and growing buybacks, no dividend, contained maintenance capex; no signs of diworsification via M&A.
• Low insider ownership. 0.4% of the directors-and-executives group; no controlling shareholder or founder vehicle.
• Guidance transparency. The company updated and raised EPS guidance in the same release that acknowledged the margin compression.

• FY2027 operating margin guidance of 'just somewhat better than 21.5%,' roughly 140 basis points below FY2026's 23.08% — the market reacted to the guided profitability deterioration, not a revenue slowdown (HOKA is still guided to grow in the low double digits).
• Unresolved tariff uncertainty: the Supreme Court struck down tariffs under IEEPA and the company does not assume reimbursement of amounts already paid, a regulatory overhang weighing on the multiple without altering product demand.
• Discretionary consumer category pressured by broad macro sentiment, even as DTC comparable sales grew 4.6% at constant currency in the last fiscal year and 6.8% in the first quarter of FY2027.

The 32% drop from the 52-week high is consistent with a market discounting the guided margin slowdown as if it were permanent. With net cash, no debt, and the company itself committing ~80% of projected free cash flow to buybacks, the business retains capital flexibility to sustain shareholder returns while it becomes clear whether the compression is transitory.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at +13%/year (+86% total): the margin of safety protects the downside. The bull (+30%/year, +269% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Manufacturing concentration. 100% outsourced to Southeast Asia, predominantly Vietnam and Indonesia.
• UGG leather. Depends on just two certified tanneries in China.
• Tariffs. Unresolved uncertainty after the Supreme Court struck down IEEPA tariffs.
• Inventory cycle. Manufacturing decisions are made months before actual demand is known.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  A narrow moat and ROIC 139% above the 10% bar, with a +55% margin → a quality business at a good price.

• Peter Lynch Growth at a reasonable price (GARP)

  A stalwart growing 6% at a multiple/growth of 1.5 → reasonable for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Earnings yield 12% (EBIT/EV) + ROIC 139% → makes the Magic Formula.

• Howard Marks Perception vs reality + cycle

  The price discounts -17% vs our 6%: perception is more pessimistic than reality, with an identified source of the discount.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor +13%/yr, bull-scenario ceiling +30%/yr over 5y and a +55% margin → capital protected, asymmetry in your favor.

• Pat Dorsey Moat strength (Five Rules)

  A narrow moat, stable; sources: intangibles, efficient scale, cost advantage → partially passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  Justifying the price requires discounting -17%, within what we project (6%) — the story squares with the numbers.