Birkenstock Stock IPO Looks Richly Priced at Over 35 Times Earnings

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The maker of the popular and venerable sandals featured in the Barbie movie plans to go public later Tuesday at a valuation of about $9 billion.

Investors will pay up for the hot Birkenstock Holding initial public offering that is due to price late Tuesday.

How rich is it? The company would be valued at about 37 times earnings using the midpoint of the pricing range of $46.50, Barron’s estimates. To arrive at our Birkenstock valuation, Barron’s took the company’s adjusted after-tax profits for the nine months ended June 30 of $193 million , subtracted stock-based compensation, and then annualized that amount and divided by the 187.8 million shares that will be outstanding after the IPO.

Notable investors like Berkshire Hathaway CEO Warren Buffett have said it’s ridiculous to exclude stock compensation from earnings. The argument in favor of excluding it is that stock compensation isn’t a cash expense and that other companies do the same thing. Birkenstock, a popular brand that dates back to the 18th century, generated roughly 20% sales growth to $1.2 billion in the first nine months of its current fiscal year. Its revenue growth is about double that of Deckers, which has been powered by its Hoka shoes.

In the IPO prospectus, Birkenstock calls itself “a revered global brand rooted in function, quality and tradition dating back to 1774.”

 

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