Shares of shoe company Birkenstock (BIRK -1.86%) got knocked down on Thursday after the company reported financial results for its fiscal third quarter of 2024. Most headlines say that the company missed estimates from analysts, but I think this is a weak explanation for what's happening today, as I'll explain.
Regardless of the reason why, Birkenstock stock was still down a hefty 16% as of 1 p.m. ET.
Birkenstock is right on schedule
Birkenstock's Q3 ended on June 30, and management reported the numbers for that period this morning. And the numbers were right on target. For evidence, consider that nothing changed with the company's full-year financial guidance. The shoe company still expects to grow revenue by 19% and have a gross margin of 60%, as well as a 30% margin for adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).
For Q3, Birkenstock reported revenue of 565 million euros, which was up 19%. And it had a net profit of 75 million euros. Analysts had reportedly hoped that the company would do a little better than this. But management appears to believe it's right on schedule, which is why it reiterated all facets of its full-year guidance.
So why is it down?
Going into its Q3 report, Birkenstock stock was trading at an all-time high price-to-sales (P/S) valuation of about 6.5.
BIRK PS Ratio data by YCharts
That's a steep valuation for a shoe company, even one such as Birkenstock with great growth and profitability. I'd guess that a lot of investors are simply taking some gains off of the table, considering the valuation is pricey and results are simply meeting guidance, not exceeding it.
I believe the valuation for Birkenstock stock would need to come down some more before it was a good deal for investors. That said, this shoe business has great financials and a stunning 250-year history. So it might be one to add to a watch list today.
