Crocs (CROX) the foam clog footwear brand, has experienced a remarkable return of 633% over the past five years, making it one of the best-performing stocks in recent times. While the stock has declined by 24% in just over three weeks and remains 36% below its all-time high in November 2021. There are compelling reasons to consider it as a leading growth stock. Let’s examine the factors behind its recent performance and why it could still be an attractive investment opportunity.
Mixed earnings announcement
In the first quarter of 2023, Crocs achieved a 33.9% increase in revenue to $884 million, with adjusted diluted earnings per share (EPS) rising by 27.3% to $2.61, surpassing Wall Street’s expectations. However, the stock has declined since the financial announcement on April 27, likely due to lower-than-anticipated guidance for the second quarter. Despite this, the company raised its revenue guidance slightly for the full year of 2023, reflecting the strong momentum of the business.
Looking beyond short-term guidance
Despite the disappointment in Crocs’ near-term guidance, the company’s market performance in the first quarter remains solid, especially considering the uncertain economic environment. Crocs continues to grow robustly and profitably, distinguishing itself from struggling businesses in the current climate. This resilience and durability of the brand make it attractive to investors who prioritize long-term brand strength over short-term results. CEO Andrew Rees expressed confidence in the company’s ability to gain market share in a challenging economic landscape.
Impressive profitability and brand recognition
Crocs has achieved exceptional profitability, boasting a gross margin of 52.3% and an operating margin of 23.9% in 2022. These figures surpass even those of industry heavyweight Nike, making Crocs an appealing investment for shareholders. The company’s success can be attributed to its strong brand recognition, evident in the rankings of sixth and eighth place for Crocs and HeyDude, respectively, in Piper Sandler’s spring 2023 Taking Stock With Teens survey. Collaborations, innovative designs, and a focused marketing strategy on social media and digital channels have contributed to Crocs’ popularity.
Positive outlook and diversification
Management remains optimistic about the future, with plans to expand the sandals business and enter the Asian market. Additionally, the recent acquisition of HeyDude will diversify Crocs’ product portfolio and reduce dependence on the foam clog. These strategic initiatives position the company for continued growth and improved financial results in the coming years, potentially surpassing management’s long-term forecasts.
An undervalued growth and value stock
Despite its substantial gains over the past five years, Crocs currently trades at a price-to-earnings ratio of just 11.6, as of May 16. This valuation is remarkable, as stocks that have performed as well as Crocs often trade at much higher valuations. The company’s improved fundamentals over time, coupled with its growth prospects, make it an attractive investment option.
Crocs Stock Analysis & Forecast
According to 13 analysts, the average target price for Crocs Inc over the next 12 months is USD 147.25. The analysts rate CROX Stock as a Strong Buy. Stock Target Advisor’s analysis of Crocs Inc indicates a slightly bullish outlook, considering 9 positive signals and 5 negative signals. At the latest closing, Crocs Inc’s stock price stood at USD 116.67. The stock price has experienced a slight increase of +0.18% in the past week, a decrease of -16.09% in the past month, and a significant growth of +103.90% over the last year.
Conclusion
Crocs, despite a recent downturn in its stock price, remains a leading growth stock with significant potential. Its strong financial performance, brand recognition, and strategic initiatives position the company for future success. The combination of impressive growth and a reasonable valuation makes Crocs a rare find in today’s market, appealing to both growth and value investors alike. Investors should keep a close eye on Crocs as it continues to make strides in the footwear industry.
