Deckers Outdoor CorporationDECKNYSE

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DCF Valuation

DCF Valuation Summary

Hold

Fair Value: $128.29 per share(market-calibrated)

+7.9%

Upside to Fair Value

Current

$118.89

Pure Model

$127.53

Fair Value

$128.29

Bull Case

$155.51

Bear Case

$102.35

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

4.13%

Calibrated Growth

3.17%

Fair value uses 85% model / 15% market-implied terminal growth. Pure model: $127.53.

What's Driving This Ratingfor DECK

✓

CapEx already efficient

CapEx at 1.36% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

↑

Margin expansion modeled

Current EBIT margin is 20.86% — below the sector mature average of 23.65%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $1.7B (20.86% margin).

→

Moderate revenue growth

Analyst consensus projects 9.06% revenue growth, fading to 3.00% by Year 10. Revenue reaches $8.2B (vs $5.0B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $106.95/share (15.8x terminal FCF) while exit multiple gives $148.12/share (27.9x terminal FCF). The 20x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.00% growth is more conservative. The base case averages both methods.

🎯

Market pricing in higher long-term growth

To justify $118.89, the market implies 4.13% perpetual growth — 113bps above the model's 3.00%. This suggests the market sees additional growth catalysts (AI, new products, market expansion) not captured in analyst estimates.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 71.68% indicates efficient cash generation. FCF reaches $1.3B by Year 10 (15.69% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.15

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)9.66%

Cost of Debt

Pre-tax Cost of Debt1.27%

Tax Rate22.30%

After-tax Cost of Debt0.99%

Equity Weight (E/V)98.49%

Debt Weight (D/V)1.51%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (98.49% × 9.66%) + (1.51% × 0.99%)

= 9.53%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$5.4B	$6.2B	$6.7B	$7.4B	$8.2B
EBIT	$1.1B	$1.3B	$1.4B	$1.5B	$1.7B
Tax	$253M	$289M	$313M	$343M	$380M
NOPAT	$881M	$1.0B	$1.1B	$1.2B	$1.3B
+ Depreciation	$56M	$64M	$70M	$76M	$85M
- Capex	$74M	$85M	$92M	$101M	$111M
- Δ NWC	$29M	$26M	$22M	$20M	$15M
Free Cash Flow	$834M	$962M	$1.0B	$1.2B	$1.3B
Discount Factor	0.913	0.761	0.634	0.529	0.403
Present Value	$762M	$732M	$664M	$609M	$516M

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$1.3B

Terminal Growth Rate3.00%

WACC9.53%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$20.2B

PV of Terminal Value$8.1B

Exit Multiple Method

Year 10 EBITDA$1.8B

Exit Multiple (EV/EBITDA)20.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$35.8B

PV of Terminal Value$14.4B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$6.5B

PV of Terminal Value$8.1B

Enterprise Value$14.6B

(-) Net Debt-$1.6B

Equity Value$16.3B

Shares Outstanding152M

Price per Share$106.95

Exit Multiple Method

PV of Projected FCFs$6.5B

PV of Terminal Value$14.4B

Enterprise Value$20.9B

(-) Net Debt-$1.6B

Equity Value$22.5B

Shares Outstanding152M

Price per Share$148.12

Pure Model Fair Value

$127.53

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.00%	2.50%	3.00%	3.50%	4.00%
7.53%	$152.32	$156.27	$161.10	$167.12	$174.86
8.53%	$136.45	$139.02	$142.05	$145.69	$150.13
9.53%	$123.75	$125.50	$127.53	$129.90	$132.69
10.53%	$113.23	$114.48	$115.90	$117.52	$119.39
11.53%	$104.31	$105.23	$106.26	$107.42	$108.72

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$102.35

-13.9% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 1.43

Base Case

$127.53

7.3% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 1.15

Bull Case

$155.51

30.8% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 0.97

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Consumer Cyclical Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth9.06%

Year 3 Revenue Growth7.05%

Year 5 Revenue Growth5.38%

Year 7 Revenue Growth4.43%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin20.86%

Terminal EBIT Margin23.65%

Tax Rate22.30%

Historical Capex / Rev1.36%

NWC / Revenue6.41%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 20x EV/EBITDA (Consumer Cyclical sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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