Crikey! Crocs, Inc. (CROX) Isn’t a Crock

Other positives for Skechers include effective cost-containment measures, global expansion (35-40 stores planned to open by the end of the year), and the upcoming back-to-school shopping season.

On the negative side, Skechers USA Inc (NYSE:SKX) is the only company of the three covered here that saw revenue decline in 2012. Furthermore, earnings have been inconsistent, and the stock is trading at a lofty 48 times earnings.

Conclusion

All three companies have potential, primarily based on international expansion. However, all three stocks are highly sensitive to broader market corrections. Therefore, any investment should only be treated as a speculative play.

Skechers might be on the right track, but with revenue declining in 2012 and the stock trading at 48 times earnings, this would be a high-risk investment.

Deckers is by far the best all-time performer of the group when it comes to stock appreciation. Margins are good, top-line growth is present, and guidance is impressive. However, weakening brands are a concern.

Crocs, Inc. (NASDAQ:CROX) is somewhat of an enigma. It has been the most consistent company of the three in regards to revenue and earnings over the past three years, yet the stock hasn’t done much. Margins are solid, debt management has been excellent, and international expansion looks to have sustainable potential. On the other hand, a declining backlog could indicate softening demand.

None of these companies present safe investment opportunities over the next few years, as we don’t know how the broader market will react when (or if) Ben Bernanke backs off monetary stimulus and interest rates increase.

On the other hand, that could be a long time from now. And within that time, all three stocks have the potential to deliver substantial returns. Just keep in mind that these are speculative/higher-risk plays. Sticking with larger, steadier companies with less downside risk is a better avenue for building long-term wealth.

The article Crikey! Crocs Isn’t a Crock originally appeared on Fool.com and is written by Dan Moskowitz.

Dan Moskowitz has no position in any stocks mentioned. The Motley Fool owns shares of Crocs. Dan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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