K-Swiss, Inc. (NASDAQ:KSWS)

inl43 (89.42) Submitted: 3/3/2007 1:42:29 PM : Start Price: $27.58 KSWS Score: -91.65

Purely a valuation play, current price roughly $28.50: E/V = 7, D/E = 0, current ratio 7.6. Free cash flow generation and increasing book value will move this higher over 2- 4 years and should outperform the S&P.

NetscribeConsGds (95.87) Submitted: 2/9/2007 7:40:12 AM : Start Price: $33.23 KSWS Score: +88.35

K-Swiss engages in the design, development, and marketing of athletic footwear for sport, fitness activities, and casual wear in the United States and internationally. Offering its products under the brand names K-Swiss and Royal Elastics, the company markets its products directly, through independent sales representatives to specialty athletic footwear stores, pro shops, sporting good stores, and department stores, as well as through its website.

The athletic sport shoe market in the U.S. is worth $19 billion the world’s largest, forming about 47% of the global market. K-Swiss faces competition from players like Nike, Skechers USA and Stride Rite to name a few. As company primarily targets the age group of 14 and 24, innovating products is the key, since teens are more receptive to the changing environment. However, inadequate efforts in product development and marketing has led to over 2% decline in K-Swiss’s top line performance for nine months ended September 2006. The company derives about 67% of its revenues from its Classic Category, which has seen a significant volume declines owing to unanticipated cancellation of orders. Other categories like children and training have also shied away to deliver impressive growth.

Additionally, Foot Locker, one of the company’s major customers, seems to shift its business to other producers, as revenue contribution from Foot Locker has declined by about 6%. To add to the woes, company’s overall order book in the first and the second quarter of fiscal 2007 is heading south. Female customers are shifting their focus towards sandals and canvas, which is affecting company’s business, as their offerings in this line are meager.

On a positive side, company has made some interesting management changes by hiring people from Nike and Adidas to boost its international operations that have been doing well. However, domestic business that forms over 65% of the revenues has shown signs of slowing down and there are no strong initiatives to drive them forward. In the light of these facts, K-Swiss does not stimulate in the one-year time horizon.

jtcairns (< 20) Submitted: 2/8/2007 3:53:57 PM : Start Price: $33.15 KSWS Score: -88.51

Good Management and Good Products for a well-identified market niche. Should have bought at 30.00

hlacheen (99.16) Submitted: 1/24/2007 2:21:59 PM : Start Price: $30.59 KSWS Score: -88.66

They will never be as profitable as a Nike since they don't employ child labor, etc... but they are still a fundamentally strong company with brand recognition. I also love their shoes =)

etstockideas (< 20) Submitted: 1/22/2007 11:38:46 AM : Start Price: $30.08 KSWS Score: -89.44

I have just completed my first round of due diligence and very stong free cash flow yield... Check out my value scorecard at:
http://etstockideas.blogspot.com/2007/01/stockpickr-spotlight-portfolio-review.html

valumatic (< 20) Submitted: 12/15/2006 10:21:06 AM : Start Price: $31.96 KSWS Score: -89.31

Gross investment is down last two years and cash economic returns are now above 80%! They are priced to fade, but will beat they fade and outperfrom.

lpmoses (53.54) Submitted: 12/7/2006 7:16:15 PM : Start Price: $31.64 KSWS Score: -90.65

Great management team, heavily invested in their own company.

DLE12 (93.80) Submitted: 11/19/2006 7:32:34 PM : Start Price: $29.97 KSWS Score: -96.29

45:CS17

noahsnyder (29.65) Submitted: 9/29/2006 6:09:01 PM : Start Price: $29.68 KSWS Score: -97.14

If this isn't a great bet at a four to five year market outperformer, then there isn't much use looking at financials. Kswiss' are a thing of beauty. They have no long-term debt and an incredibly low (<19%) liability to assest ratio. Their growth over the last ten years has been nothing short of incredible. Their P/E is currently favorable although the price/book is a bit high for me (almost 4), it is reasonable given the consistent growth the company has achieved. Earnings have slumped a bit (although last quarter reports were pretty good). Kswiss has done a good job expanding overseas but their revenue is still 80% domestic. The managers don't really expect a turnaround until Q3 of 2007, but I see it advancing gradually ahead of that and maybe even straightening things out a bit quicker than manager's expectations. My main concern right now is that management approved a huge stock repurchase in June (over 4 million shares), but Kswiss hasn't bought back much. In the past they have been very good about repurchasing shares. If they are not buying now is that because they believe the stock is NOT undervalued? If that is the case I'm not sure why--but I will likely buy when they do.

XMFWBuffettJr (97.46) Submitted: 9/27/2006 6:56:28 PM : Start Price: $30.51 KSWS Score: -95.90

This stock was cheap around 2002. I really, really liked it but never invested. I'm not sure why I didn't but I missed out on some nice gains. After stagnating for a year or so in spite of earnings rebounding, we are seeing much the same picture here as I did in 2002. Still no debt, still large profit margins over the industry, still buying back millions of shares, still growing earnings. Look-through earnings aren't skyrocketing like back in 03-04, but are still growing.

I'd rather get in at $27, but hey, I'm here now so I'll take $31. It's only play money anyway ;)