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Crocs (NASDAQ:CROX) is a footwear company known for their popular sandals and clogs made out of a comfortable waterproof material.

Last quarter’s results were:

  • Revenue 142 vs 44.8 an increase of 216%
  • EPS .61 vs .17 an increase of 258%
  • They raised the 07 guidance to:

  • EPS 2.90-2.95 a projected increase of 80-83% over 06
  • Revenue 670M -680M a projected increase of 89-92% over 06
  • The footwear business can be a very profitable sector. Especially since a lot of the value is branding. These clogs retail for around $29.99. Perhaps the cost to produce them is low because the shoes look like they were taken right out of a mold. One criticism of the shoes is that they look ugly, I suppose that would be in the eye of the wearer. Well they just announced a fashion line called ’You by crocs’ for the fall of 07 hopefully that will appease the critics. A couple reasons the stock is reasonably valued are:

  • The products are being considered a fad that will fizzle out.
  • Copy cat companies making cheap similar products.
  • Management and founders cashing out and selling stock (41 insider sales of 2Mil shares in the last 6 months)
  • On the positive side:

  • Their numbers and financials are excellent.
  • Management is creating new products and licensing deals
  • Customers rate these shoes highly
  • The chart shows that the stock has had a huge increase, making it risky for a pullback:

    crocs chart

    Cramer has been talking positively about the stock, perhaps helping it gain momentum. Cramer said, "I think that CROX is a company that you can own until everyone has decided that every analyst and his brother has recommended."

    Valuation:

  • EV- 3.24B
  • NI- 82.9M
  • EV/NI- 39
  • PE- 41.86
  • ROE- 43.93
  • Analysts are calculating an earnings growth rate of 25% for the next 5 years. I’m calculating 29% and a 29% ROE; using these numbers gives me a 23.6% growth rate for the next few years. Or a share price of 105 in a year. That is barring any unforeseen negative events. This one is not for the faint of heart. I rode it through almost a 50% decline last year to see it increase over 100% from there in a few months. Invest wisely.

    Disclosure: Author has long positions in Crox

    Source: Why Crocs is a Top Stock Pick