Introduction
Crocs Inc. (NASDAQ: CROX) is currently trading at $109 per share, up 3% on the day, but still down 25% over the past year from its prior highs. Year-to-date, the stock hit a bottom of $88 per share in February, but has rebounded 22% since then.
Is this a buying opportunity for Crocs to return to its 2024 highs? We analyze its latest earnings, financial metrics, and valuation using the discounted free cash flow (DCF) model, comparable company model, and Ben Graham's intrinsic value formula to determine if Crocs is undervalued or fairly priced.
Crocs Financial Overview
Key Metrics:
- Market Cap: $6.1 billion
- Price-to-Earnings (P/E) Ratio: 6.87 (extremely low compared to the market average of 27.99)
- Earnings Per Share (EPS): $15.88
- Beta: 1.84 (high volatility compared to the market)
- Analyst Price Target: $128 per share, indicating significant upside potential
Revenue and Profitability:
Crocs has demonstrated strong growth, reporting $4.1 billion in revenue, up from previous years.
Revenue Breakdown:
- North America Wholesale: Slight decline.
- North America Direct-to-Consumer (DTC): Increased sales.
- International Sales: 10-15% growth in both wholesale and direct-to-consumer sales.
- Crocs Brand Growth: Strong, though the "Hey Dude" brand has struggled slightly.
Cash Flow & Share Repurchases:
- Net Income: $950 million, showing steady profitability.
- Free Cash Flow (FCF): $920 million, reinforcing a solid financial foundation.
- Operating Cash Flow vs. CapEx: Increasing OCF, while CapEx spending is declining.
- Share Buybacks: Actively repurchasing shares, signaling confidence in valuation.
Valuation Analysis
Discounted Free Cash Flow (DCF) Model:
DCF values stocks by projecting future free cash flows and discounting them to present value.
Inputs:
- Revenue Growth Projections: 5% annually (analyst estimates are more conservative at ~4.2-4.3 billion).
- Net Income Margins: 23.74% (historical average).
- Discount Rate: 8%
Based on these factors, CROX’s intrinsic value is approximately $200 per share, suggesting significant undervaluation.
Ben Graham’s Intrinsic Value Formula:
Ben Graham’s valuation approach incorporates earnings growth and bond yields.
- AAA Bond Yield: 5.29% (slightly lower than previous figures).
- Expected Growth Rate: 7%
Applying Graham’s model places CROX’s intrinsic value at $190-$200 per share, reinforcing a buy case.
Comparable Company Model:
Crocs is compared to industry peers, including:
- Nike (NKE)
- Deckers Outdoor (DECK)
- Skechers (SKX)
Key Comparisons:
- Revenue Growth: Crocs exhibits higher growth than Skechers and Nike.
- Profit Margins: Crocs boasts strong profit margins, only second to Deckers.
- EV/EBITDA & Price-to-Sales Ratios: Crocs is undervalued relative to competitors.
After factoring in comparisons, CROX’s valuation aligns around $190 per share, reinforcing a buy rating.
Conclusion: Is Crocs a Buy?
All three valuation models indicate Crocs remains an attractive buy:
- DCF Model estimates intrinsic value at $200 per share.
- Ben Graham’s Formula suggests $190 per share, reinforcing upside.
- Comparable Company Analysis values CROX around $190 per share, supporting significant undervaluation.
Despite recent stock volatility, Crocs maintains strong profitability, increasing free cash flow, and robust growth in its core Crocs brand. Aggressive share buybacks and low P/E ratios make it an appealing investment.
Final Verdict: Crocs is a Buy, with substantial upside potential based on fundamental analysis.
https://youtu.be/T12SDdQXx_8?si=ck51ObVNwq8WCRAo
Introduction
Crocs Inc. (NASDAQ: CROX) is currently trading at $109 per share, up 3% on the day, but still down 25% over the past year from its prior highs. Year-to-date, the stock hit a bottom of $88 per share in February, but has rebounded 22% since then.
Is this a buying opportunity for Crocs to return to its 2024 highs? We analyze its latest earnings, financial metrics, and valuation using the discounted free cash flow (DCF) model, comparable company model, and Ben Graham's intrinsic value formula to determine if Crocs is undervalued or fairly priced.
Crocs Financial Overview
Key Metrics:
Revenue and Profitability:
Crocs has demonstrated strong growth, reporting $4.1 billion in revenue, up from previous years.
Revenue Breakdown:
Cash Flow & Share Repurchases:
Valuation Analysis
Discounted Free Cash Flow (DCF) Model:
DCF values stocks by projecting future free cash flows and discounting them to present value.
Inputs:
Based on these factors, CROX’s intrinsic value is approximately $200 per share, suggesting significant undervaluation.
Ben Graham’s Intrinsic Value Formula:
Ben Graham’s valuation approach incorporates earnings growth and bond yields.
Applying Graham’s model places CROX’s intrinsic value at $190-$200 per share, reinforcing a buy case.
Comparable Company Model:
Crocs is compared to industry peers, including:
Key Comparisons:
After factoring in comparisons, CROX’s valuation aligns around $190 per share, reinforcing a buy rating.
Conclusion: Is Crocs a Buy?
All three valuation models indicate Crocs remains an attractive buy:
Despite recent stock volatility, Crocs maintains strong profitability, increasing free cash flow, and robust growth in its core Crocs brand. Aggressive share buybacks and low P/E ratios make it an appealing investment.
Final Verdict: Crocs is a Buy, with substantial upside potential based on fundamental analysis.
https://youtu.be/T12SDdQXx_8?si=ck51ObVNwq8WCRAo