Hey Nike, Why Don't You Just Buy Deckers Outdoors?

Tickers in this article: DECK NKE

After the dividend increase to 21 cents over the previous split-adjusted quarterly rate of 18 cents per share, the dividend yield, based on the Monday closing price of $96.32, will increase to a percentage technically higher than the yield on the 10-year U.S. Treasury Bond...1.75%.

Here's a lovely chart showing Nike's stock price over the last year in relationship to its trailing 12-month earnings per share. NKE ChartNKE data by YCharts

Not exactly a pretty picture unless the year-over-year EPS growth is about to pick up significantly. That may or may not happen, but I have an idea that could be accretive to earnings and may accelerate the upward price momentum of NKE shares.

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Drum roll please, and the band plays "dah-dah"! My brilliant idea is for NKE to quickly and stealthily offer to buy Decker Outdoors while it's still a relatively inexpensive stock. Since NKE will be increasing its float with the stock split it can offer a part cash, part stock deal to DECK shareholders.

Let's pause to look at a chart similar to the one I amused you with above. DECK ChartDECK data by YCharts

Also a very gut-wrenching picture, especially for beleaguered DECK shareholders, and the solutions to the nose-diving EPS are not readily apparent. In the most recent quarter ending Sept. 30 DECK had an operating margin of 16%, a price-to-earnings-to-growth ratio (PEG ratio) of only 1.19, and too much debt ($275 million).

That being said, DECK has a good line of products that includes luxury footwear, handbags, apparel, and cold weather accessories under the UGG brand name. It offers open and closed-toe outdoor lifestyle footwear, multi-sport shoes, light hiking shoes, amphibious footwear, and rugged outdoor travel shoes under the Teva brand name.

It also has an action sport footwear under the Sanuk brand name, high-end casual footwear for men and women under the TSUBO brand name, outdoor performance and lifestyle footwear under the Ahnu brand name and work footwear under the MOZO brand name.

The company's leadership hasn't been able to deliver the important bottom-line numbers. That's why the EPS for last quarter plummeted 31% on almost 10% less revenue. Yet, the stock is trading at less than a 9 forward PE. Monday's almost 9% jump in the price per share on higher than average volume tells me, if you'll excuse the pun, that something is "under foot."

My hope is NKE steps up to the plate and takes this company over. It appears to be a win-win for everyone involved, and just the suggestion may help elevate the price of both companies.