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Anatomy of Success: Rocky Brands (RCKY)

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Discovering which stocks are best positioned to see their price increase is surely a daunting task, but by utilizing a tool like the Zacks Rank, it becomes much easier, and much more profitable.

Stocks with a #1 (Strong Buy) ranking have a long history of outperforming the markets over a one-to-three-month time period, and it’s important to note that only 5% of the Zacks Rank universe receives this unique grade. Not only does this ranking system help identify the most elite companies, but it also enables people to hold a certain security while it continues to gain in value beyond the three-month investment horizon.

Below, we highlight a stock that has evolved into a strong player in the broad retail industry, and by following our ranking system, investors could have realized major gains.

Rocky Brands (RCKY - Free Report)

Based in Nelsonville, OH, Rocky Brands is a leading designer and manufacturer of premium quality footwear and apparel marketed under a portfolio of well recognized brand names including Rocky Outdoor Gear, Georgia Boot, Durango, Lehigh, and the licensed brand, Dickies.

RCKY was first added to the Zacks Rank #1 (Strong Buy) list after it reported its fiscal 2017 third quarter results. Earnings of 39 cents easily beat the Zacks Consensus, while revenues of $65 million matched our estimate. Retail sales grew 7.8%, and gross margin increased 320 basis points thanks to a significant improvement in both wholesale segment and military segment margins. At the closing bell on October 27, shares of the specialty retailer closed at $17.80.

The company kept up this Strong Buy run right up until the end of the year, and was given the #1 title again in early January, mostly likely due to analyst bullishness heading into the company’s next earnings release. About four months after first hitting the top of the Zacks Rank, RCKY closed up 16% to $20.65 per share.

RCKY was added to the Strong Buy list a third time at the end of February after impressive fiscal 2017 fourth quarter results. Both its top and bottom line beat the Zacks Consensus estimate. Wholesale sales for the quarter increased 4.7%, while retail sales grew almost 5%. Additionally, Rocky ended the year with funded debt down 84.9% to $2.2 million, and inventory decreased 5.1% to $65.6 million.

RCKY hit a bit of a rough patch in the five months from when it first became a Strong Buy stock—shares only rose about 4%—but if you stuck with Rocky Brands, you’d have realized an over 54% gain from the third time it became a Strong Buy stock until the closing bell last Friday. Strong Q1 fiscal 2018 earnings in April helped Rocky Brands maintain its presence on the top ranked list, and the stock is currently a #1 (Strong Buy) on the Zacks Rank. Most notably, shares have risen well over 134% in the past one-year period.

This table shows the price performance of RCKY (in red), as well as the 12-month forward looking EPS estimate (in green) from the time the stock first earned a Zacks Rank #1 (Strong Buy). During this stretch, RCKY never moved lower than a Zacks Rank #3 (Hold).

By utilizing the Zacks Rank, investors are able to easily identify elite stocks that are best positioned to beat the market on a consistent basis, and how to hold those top stocks as they continue to grow.

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