Why Crocs is a Top Stock Pick

Crocs (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:

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