Crocs, Inc. (CROX) Is Going to Outperform

In the long run, Crocs, Inc. (NASDAQ:CROX), the global leader in casual footwear should benefit from strong retail sales, increased consumer confidence, and exposure to international markets, including Africa.

The company’s stock has underperformed the index, but has not declined as much as a major competitor, Deckers Outdoor Corp (NASDAQ:DECK), the maker of UGGs, since June 2012. Outperformance is possible if the company’s management does not commit a major mistake and the economy stays out of another recession (risks for any company).

Crocs, Inc. (NASDAQ:CROX)Fundamentals and Valuation of the Company

For a market capitalization of $1.4 billion and an enterprise value of $1.1 billion, the company’s number of outstanding shares is 91 million. Its balance sheet has no debt and $313 million of cash and short-term investments, or $3.44 per share.

Cash on the basis of Share Price

If, Crocs returns a larger portion of its cash to shareholders then, similar to Apple Inc. (NASDAQ:AAPL), the company will likely unlock its share value. From the above table, DECK’S 4% is similar to $1.70 per share in cash. However, credit should be given to Deckers for repurchasing $184.7 million worth of its own shares with another $115.3 million remaining under its repurchase plan as of September 30, 2012.

A table is being provided below that will compare different metrics of Crocs to those of Deckers and the S&P 500 Index.

Source: SEC filings, Reuters.

The above table represents that in comparison to Deckers and the S&P 500, Crocs has cheaper valuation. After accounting for expected growth, its PEG ratio is less than one. Furthermore, CROX’s balance sheet has more flexibility, and globally its sales are slightly more diversified.

Competitive Position of the Company

Crocs has a well-established competitive position in the U.S. and internationally. Some the competitive positions of Crocs are enumerated below.

Due to strong positions in clogs and developing new brands, Crocs is able to continue growing its sales. Aesthetically, Crocs’ clogs are not very appealing, but they come in attractive colors, are durable, easy to maintain, and easy to slip on and off. In addition, Crocs are suitable for different ages, and is a favorite with both men and women. Deckers’ most popular brand, UGG generates about 75% of the company’s revenue, and sells predominantly to women and teenage girls. UGGs are mostly available at high-end stores such as Nordstrom, Nieman Marcus, and Bloomingdale’s, in addition to Zappos.com. On the other hand, Crocs are available at more stores such as, Famous Footwear, Academy, DSW, Murasaki Sports, and others. Online retailers for Crocs are Zappos.com and Amazon.com.

Crocs has an established foothold in the African continent, which is another source of competitive advantage. The company has 27,000 square feet of wholesale and office facilities in Gordon’s Bay, South Africa and manufacturing facility in Padova, Italy, which is near the Mediterranean Sea and offers easy access to Africa by boat. Crocs’ most popular clogs are suitable for the climate on the African continent and appeal with their durability and easy maintenance. Crocs should be able to capitalize on its easy access to the African market.

On a concluding note

The word Crocs is synonymous with clogs around the world. However, Crocs is still able to grow at a fast pace as the company now offers a year-round collection of over 300 models for men, women, and kids that are sold in nearly 100 countries. Crocs is also licensing its brand to such products as hats, bags, sunglasses, and socks. Compared to S&P 500 and Deckers, Crocs’ common stock trades at a discount and at current levels it could easily double in a 52-week period.

The spring and early summer months are the strongest for Crocs’ sales, and in the past few years, the stock has risen during this period. Finally, the company is exploring a number of growth initiatives, which offer upside potential with limited downside. I am pretty bullish that in the near future the company is not going to disappoint its valued investors, as well as customers.

The article This Casual Footwear Company Is Going to Outperform originally appeared on Fool.com and is written by Abir Karmakar.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Top 10 Most Expensive Luxury Cars in the World – 2014

Killer Small Business Ideas

The 50 Best Personal Finance Blogs

Most Expensive Apartments in New York City

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!