3 Reasons to Sell COLM and 1 Stock to Buy Instead

Columbia Sportswear has gotten torched over the last six months - since January 2025, its stock price has dropped 31.2% to $60.29 per share. This might have investors contemplating their next move.

Is there a buying opportunity in Columbia Sportswear, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.

Why Do We Think Columbia Sportswear Will Underperform?

Even with the cheaper entry price, we're cautious about Columbia Sportswear. Here are three reasons why we avoid COLM and a stock we'd rather own.

1. Weak Constant Currency Growth Points to Soft Demand

In addition to reported revenue, constant currency revenue is a useful data point for analyzing Apparel and Accessories companies. This metric excludes currency movements, which are outside of Columbia Sportswear’s control and are not indicative of underlying demand.

Over the last two years, Columbia Sportswear’s constant currency revenue averaged 1.3% year-on-year growth. This performance was underwhelming and suggests it might have to lower prices or invest in product improvements to accelerate growth, factors that can hinder near-term profitability.

2. Projected Revenue Growth Shows Limited Upside

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Columbia Sportswear’s revenue to stall. Although this projection implies its newer products and services will spur better top-line performance, it is still below the sector average.

3. New Investments Fail to Bear Fruit as ROIC Declines

ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Columbia Sportswear’s ROIC has decreased over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Final Judgment

We cheer for all companies serving everyday consumers, but in the case of Columbia Sportswear, we’ll be cheering from the sidelines. Following the recent decline, the stock trades at 16.8× forward P/E (or $60.29 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think other companies feature superior fundamentals at the moment. We’d recommend looking at the most dominant software business in the world.

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