I Love Crocs and I love the stock. But the stock has taken a beating unfairly due to their recent acquisition, profit taking, and general market jitters for anything that has a supply chain. But the fact of the matter is, Crocs is an incredible company on a tear and it looks like the stock just hit bottom. Some facts to support my case:
- CROX is down -54% from its all time high
- Trading at a P/E of 8, making it a value stock unfairly grouped into the growth-stock-garbage bucket. It's nearest peer/competitor, Decker's, trades at a P/E of 20 and has 1/4 of the revenue growth (10% for DECK)
- Revenue growth = 43% q/q and 67% TTM
- Projected earnings growth is 23% for 2022
- EBIT margin is high at 31%
- Trading at 9x free cash flow
- Will benefit from people going back to stores
- Brand is incredibly recognizable and beloved. I've tried finding replacements, but it's not worth the hassle when they just work
- Company continues to invent new types of footwear, from slippers and boots sold for winter to women's sandals that aren't ugly
- It's a favorite shoe of parents. Kids can pee on them, puke on them, drop ice cream on them and they clean up fast in a sink. And unlike sneakers it doesn't take 20mins to put them on kids
- Refinitiv just upgraded the stock to a buy as did Zacks.
- Most recent analyst upgrade sets the price at $200 (if you pay attention or care about analyst opinions – I don't but it does give some signs of potential momentum building). It's trading at 81/share.
- TA shows a double bottom at $79
- Insiders just started buying the stock
- CEO guidance was very strong for 2022 and beyond, forecasting revenue growth of 300% by 2026
- They still have 1B set aside for stock buybacks in 2022.
- They are in position to capitalize on the coming post-covid revenge travel and spring/summer weather
- Their acquisition of Hey Dude will add over 600m in annual revenue at 31% profit and increase their online DTC channels, which were already up 64% yoy. This will enable them to keep their margins high due to not having to pay for the middle man. They paid 2B in cash for the deal but financed the entire thing at today's low interest rates so they have retained their own cash for expansion/buybacks.
- Market cap is currently just under 5B at a price to sales ratio of 2. Even at that reasonable valuation, if they hit the 6B in sales by 2026 they project, they would be worth 12B. I think it's more likely they will be trading much higher than that.
- As the supply chain issues dissolve and shipping costs go down in H2 2022, they will see profit margin expansion.
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