Crocs: On the Down Escalator

Crocs (CROX), manufacturers of extraordinarily ugly popular shoes, released spectacular fourth-quarter earnings Tuesday afternoon, with both revenue and earnings almost doubling their levels from a year previously. Obviously no one's particularly worried about the escalator problem.

The stock, however, was down 13% yesterday. Colin Barr thinks it's because demand was so strong that the company had to ship some shoes by air freight; Kathy Shwiff thinks it's because the 2008 earnings forecast fell short of expectations; and David Phillips thinks it's because inventories rose a lot. Me, I just think that what goes up must come down.

See also:
Crocs Q4 2007 Earnings Call Transcript

Comments

[BocaT]

Boca T Feb 25 05:55 PM. I think they are all crazy. This shoe remains a growing phenomenom. Look at European sales. Sales exceeded targets, as did earnings, up 70% + last period and 80% + this, plus the cost per shoe suggests sales even in down economic times. An inexpensive shoe that is comfortable, and has many uses. This stock should be climbing and because it is a new thing, the analysts are worried, but their insight is suspicious.

Boca T.

[Samurai_stockholder]

In addition to your in depth and highly original stock analysis, "what goes up must come down", did you happen to dig just a little bit deeper and notice the predatory short interest in the stock?

Had you dug deeper you would have found that CROX is literally the cheapest stock in the entire market in terms of value:

PE: 9
PEG: 0.257
ROE: 50.6%
ROA: 35.9% about twice industry average.
Debt: zero
Forward EPS growth: 35%
Net Margins: 20% (highest in industry)
YOY sales growth: 139%
YOY earnings growth: 143%

**If you plug just the first 6 parameters in a stock screening program, CROX is the only company out of 11,286 companies in the entire market that remains....

If you dug even deeper you might find that CROX's short interest is over 30% of its float.

Now, look at its financial results then look at the short interest. Which do think is the cause of CROX's fall in share price?

Inventories are growing because sales are growing at 139% YOY. Current inventory as a percentage of projected sales is 16% which is actually lower than the industry average.

Regarding "missing earnings", analysts just prior to the announcement increased their projections. It's always difficult hitting a moving target.... CROX actually exceeded their '07 guidance.

It's predatory shorting that caused this fall and nothing else. It's a small float company so it was wreckable and the hedge funds wrecked it.

Rather than spending time coming up with a pithy title for your article, you might have done some real research and then suggested to your readers that CROX is an incredible buy at these prices and is set up for a short squeeze, which it is.

Why post something meaningless like you did? Why not show your readers what a great buy you found?

They'll thank and appreciate you more for it.

I challenge you to write a follow up article once the "escalator" starts going up next week.

Something along the lines that hedge funds can sometimes make big mistakes when over shorting a strong and growing company.

[HarryHoudini]

Stupid simple-minded article. What goes up must come down. Wow. Then I suppose any stock that goes up must come down. Is the reverse also true?

Wow. I will have to add that to my analysis of stock valuation in the future. What goes up must come down. Is this stock up? If it is, it must be going down. Cuz after all, what goes up must come down.

Guy that posted this is a simple minded twit.

But if he shorted, he was right.

[DaveinHackensack]

Well said, Boca T. I don't own CROX but I may consider buying at these levels.

[Matty79]

This stock is going to rock off the charts. What goes up must come down...but it will go higher than it did the last time this go around. Now they are going to get Australian exposer joining up with the AVP down there. Look out.