Some names in the retail and apparel sectors have made a splash in investors’ monitors in recent weeks, even months. Unfortunately, the attention is founded on seriously bearish price action, like the fact that shares of Lululemon Athletica Inc. (NASDAQ: LULU) are now trading at only 48% of their 52-week high, which is dangerously close to making a new 52-week low.

Another unlikely name to be trading near a 52-week low is Nike Inc. (NYSE: NKE). Management issued lower-than-expected financial guidance for the rest of the year, sending the stock into a shock selloff. Nike stock is now trading at 58% of its 52-week high, or within 1% of a new 52-week low, to match the bearish price action seen in Lululemon shares.

But, there is one other mention inside the Consumer Discretionary Select Sector SPDR Fund (NYSEARCA: XLY), one that hasn’t been suffering from that much of a bearish price action lately. Shares of Skechers Inc. (NYSE: SKX) trade much closer to their 52-week highs, at 85%, to show investors a different side of the consumer discretionary sector. Here’s why Skechers stock might see an even brighter future ahead.

Financial Momentum Paves the Way for Higher Stock Prices

The company recently announced its second quarter 2024 earnings results, showing the market just why Skechers stock is worth considering. In the press release, management proudly mentioned the company's record sales, up to 7.2% growth to a net $2.16 billion.

However, the benefits don't stop there for shareholders; Skechers' gross margins rose by 220 basis points in the year, reaching a net 54.9% gross margin. The shoe behemoth operates on a much lower 44.6% gross margin compared to Nike's financials.

Retaining this much capital from each sale enables Skechers management to safely and effectively reinvest into other business growth areas. Looking at the past 12 months of returns, Skechers generates up to 11.3% return on invested capital (ROIC) rates, which is probably why the stock outperforms others in the sector.

Annual stock price performances tend to match the ROIC rate over time, and the path is paved for Skechers to continue to create high returns on capital to do this. This confidence is simple: the company has more exposure to international markets. It relies on more than just American demand.

With gold prices hitting a new all-time high, as nations stockpile gold reserves, investors can take this behavior as a vote of no confidence on the U.S. dollar and the economy, so stocks with a higher international sales exposure could become a preference.

This confidence is also quantified for investors, valued at up to $1 billion. That's how much management will allocate toward Skechers' share buyback program, representing over 10% of the company's market capitalization. This is a very aggressive rate, signaling that insiders believe the stock to be cheap today.

And that opinion doesn't stop with management; others on Wall Street would agree.

Wall Street Shows Optimism for Skechers Stock

Overall, Wall Street analysts forecast up to 13.9% EPS growth in the next 12 months for Skechers stock, which aligns with Nike's projections for 13.1% despite Skechers being a fraction of Nike's size.

Leaning on these growth projections, other analysts, such as those at Morgan Stanley, found it easier to value Skechers stock. These analysts set a price target of $80 a share, daring it to rally by 25.6% from its current price.

As another quality stamp check, investors can note that the Vanguard Group (Skechers' biggest shareholder) boosted its stake in the company by 0.8% in the past quarter. While this may not sound like much in percentage terms, that increase would translate into a net $779.5 million investment today.

If that wasn't enough for investors to consider another look into Skechers stock, then decrypting the market's message might do it. Outlying valuations can sometimes be the market's way of saying that it likes – or dislikes – a stock, depending on where that valuation multiple is.

On a price-to-earnings basis (P/E), Skechers' 16.8x multiple will command a premium of nearly 100% compared to the footwear industry's average 8.9x P/E.

There's typically a good reason why markets are willing to bid a stock up in its valuation multiples and why this stock will, in turn, trade near its 52-week highs. Seeing all of the evidence on a fundamental and technical level, investors could consider adding Skechers to their watchlists.