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

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

The 10 Most Peaceful Countries in the World

5 Big Reasons Communism Failed

The 15 Most Famous Carl Icahn Quotes

10 Scary Animals that are Actually Harmless

The 8 Most Famous Singer-Actors in Entertainment

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!