Deckers Outdoor Corp. (DECK) is a leading designer, producer and brand manager of innovative, niche footwear. The company reported strong results for the third quarter, easily beating consensus estimates. Management also increased its guidance for full-year 2008. The upside in the third quarter was due to the continued strength in the company's UGG brand.

Even so, we would be careful before getting too bullish on Deckers. While the company's sales growth remains strong, there are concerns that Deckers profit margins have peaked and will move lower in the coming years. Additionally, the global economic slowdown will reduce discretionary spending in the U.S. and abroad, and that will eventually lead to softer sales for Deckers.

Deckers Outdoor shares are currently trading at 10.6x our 2008 EPS estimate and 9.5x our 2009 EPS estimate. This multiple is in-line with the industry mean and median. In recent years, DECK shares have traded at a multiple well above its industry peers. But given the global economic slowdown and the company's profit margins declining, a multiple in-line with industry peers is reasonable, in our view. All told, we think the stock trades at a reasonable valuation. We maintain our Hold rating.