Crocksodile

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Nike (NKE) might garner the vast majority of footwear stock searches by financial pros.

But the #2 spot has an unlikely contender with plenty of pageviews to brag about.

Once regarded as hospital shoes, the Crocs (CROX) brand reinvented itself into a fun and casual footwear company. 

But they’re not playing games. 

To help spread brand awareness, they brought in some of the biggest stars in pop culture, like Justin Bieber, Bad Bunny, Kendal Jenner, and Post Malone. 

Of course, celebrity endorsements can be hit or miss as Nike knows.

So you must be wondering, has the strategy worked, and more importantly, is Crocs (CROX) a good investment?

Check out our analysis below…

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Croc’s Business

Croc’s Inc (CROX) is a global footwear company selling clogs, sandals, slides, flip-flops, shoe charms, loafers, sneakers, and slippers—in 90 countries through wholesalers, retail stores, and online. 

CROX has sold over 720 million pairs of shoes in the last 23 years. It is the number #1 leader in the clog category. And in 2020, it sold 69 million pairs of shoes. 

The company has over 165 retail stores in the Americas, 137 in the Asia Pacific, and 49 in the EMEA. It sees its greatest potential for global growth in Asia. 

In late 2021 CROX announced the acquisition of HeyDude shoes for $2.5 billion. The firm believes this will diversify its portfolio, and add a strong source of revenue in the future. 

In the most recent quarter, CROX hit $660 million in consolidated revenues, an increase of 43.5% when compared to 2021’s Q1. 

It has been able to make impressive strides in growing its brand via social media and collaborating with celebrities like Post Malone. The Crocs Brand digital sales grew 20.3% in Q1 2022, compared to Q1 2021. 

Financials

One thing that stands out with CROX has been its steady revenue growth over the years. The firm has doubled its revenues from $1 billion in 2018, to $2.3 billion in 2021. 

With inflation high, and interest rates rising, debt becomes a closely watched metric along with cash flow. 

CROX has $3.11 billion in total debt, $171.97 million in cash, and a market cap of $3.36 billion.  

The firm has a quick ratio of 1.2x and a current ratio of 2.0x. Investors will use these two metrics to get an indication of liquidity, and the ability to handle short-term debt. Anything above a 1x shows investors that CROX has enough short-term assets on hand to deal with its short-term liabilities. 

Valuation

Valuation matters in this market. And one-way traders measure a stock’s relative value is the price-to-earnings ratio. 

CROX has a P/E ratio of 4.26x, which is significantly lower than the sector median of 11.25x. Generally, the lower the P/E, the more attractive or cheap the stock is to investors. 

Furthermore, CROX has an impressive price-to-cash-flow of 6.3x. The sector median is 10.5x, which is 67% higher than CROX. 

But that’s not all to be impressed with. You see, CROX has a gross profit margin of 60.5%. That is much better than the sector median of 36.5%, and it’s even better than the company’s 5-year average of 52.7%

CROX knocks it out of the park with an EBITDA Margin of 30.44%, which is not even comparable to the sector median of 12.2%. Neither is its net income margin of 27.8%, which bests the sector median of 6.5%

The company generates $468 million in cash from its operations. To put that in perspective, Skechers (SKX), and Steve Madden (SHOO), generate $134 million and $91 million in cash from their operations. 

CROX has experienced a resurgence of late. As witnessed by the firm’s revenue growth rate, which is 60.6% (YoY). 

And its EBITDA growth (YoY) stands at triple digits, which is better than WWW, SKX, DECK, and RCKY, but not as high as SHOO’s 357% 

Our Opinion – 9/10

CROX shares are down more than 70% from their 52-week highs of $183. The Crocs brand is international and the undeniable leader in the clog space.

The company has found success with celebrity endorsements like Kendall Jenner, Justin Bieber, and Post Malone.  

However, that is not the reason why you should buy the stock. It’s the fundamentals, and the new pockets of growth the company is finding. 

We like the stock at these levels, and think it will be trading higher in the next 12 months.