Crocs (NASDAQ: CROX) was one of the best-performing stocks of 2007 until it hit the wall after releasing its September 30th quarterly results. The stock began 2007 at $20.68, ran up to a high of $75 and now sits at $45. The December, March and June quarterly results were spectacular, exceeding both top line and bottom line expectations. The company and analysts raised expectations for forward quarters and the hedge funds that were short the shares thinking the company is just "a fad", got annihilated.
The September quarter results were by all measure excellent as Crocs reported revenues of $256 million, up 130% from the previous year and earnings were up 144% to 66 cents per share. The consensus estimates were for earnings in the 63 cent to 64 cent range and revenue was expected at $253-$258 million. With revenue not "crushing" expectations, the stock was crushed, down from $75 to $32.
In spite of the stock coming down dramatically, many portfolio managers that missed the first run up from $21 to $75 had an excellent opportunity to begin buying the shares. Many have. The stock has rebuilt its value to the $45 level and is still inexpensive versus any traditional valuation methodology. Street expectations for earnings this year is $1.98 and $2.70 for 2008, a solid 35% growth. Revenue will come in this year at $830-$840 million and expectations for 2008 are set for $1.150 billion, again up 35-40%.
With product diversification and a billion dollar revenue run rate, investors are more apt to view Crocs as a true global manufacturer of footwear and apparel.
Then there are those margins.
Crocs reported operating profit margins at 30% for the September quarter. These type margins are nearly unheard of for a young growth company. These are virtually mature software-type company margins. The operating margins going forward should stay in the high 20's% thus generating incredible amounts of cash flow.
Crocs seems to have found its footing again. With a conservative PE multiple of 25 times the 2008 $2.70, the stock should trade up to $65 to 70 over the next 12 months. Again, I said conservative...
Georges Yared is the CIO of Yared Investment Research. He is a Crocs holder.
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Reader Comments (Page 1 of 1)
12-10-2007 @ 12:22PM
Allen Schwartz said...
thanks for this update
12-11-2007 @ 8:31AM
Yared is a moron.com said...
30% profit margins are "unheard of" for young growth companies. You are a true fool that got a lucky call, stick with being a bonehead broker. Did you happen to see the PROFIT MARGINS for HEELYS?!?!!? Did you see the PROFIT MARGINS for PREMIUM DENIM companies? Idiot, profit margins are highest for FAD companies because pople pay stupid prices and there's little competition for hte product. When the FAD wears off and competition rises, the margins drop because a RUBBER CLOG can't do anything to distinguish itself. Poor Yared will continue to think he was "right" because CROX is a momo bubble stock and when the stock continues to correct he'll end up with 0 return.
The product is so great but they have $200MM in INVENTORY on the books of a bunch of SEASONAL SH!T.
12-12-2007 @ 3:53PM
John said...
Crox; The insiders even sold and ran the other way! why this guy thinks he has more insight than the directors!!!?????????
12-12-2007 @ 3:55PM
John said...
CROX; High inventory,fad product,All retail sales are falling disappointing #s etc. Evan Wal-mart sales are sliding!croxs' has a ton of legal problems,evan s.e.c. checking on them! The insiders do not buy their own stock @ what they call cheap! The insiders have sold and don't look back!! BUT THE FOOLS THINK IT must go through the sky! people who buy this stock proably, would probly be interested in some beach front property in Arizona!!! real people should follow the board of directors, as they have the inside scoop!!! SELL SELL SELL!!!!!!!!!!!!!!!!!!!!
12-26-2007 @ 8:09PM
John said...
Holiday sales were OFF, hmm! so some one throws out a RUMOR,trying to maniuplate a dead horse! Still NO insiders want to buy,why would anyone else want this dead horse??? When they go bankrupt anyone can take over the patent, if it doesn't expire in meantime!
12-27-2007 @ 2:00AM
Gumby said...
The most frequent reason for insider selling is to prevent the stock price from falling. How? Well, if the stock fall down, the insiders would buy them back again. Wall Street is not stupid so they keep stock price up to keep insiders from double dipping. That is how insider traders work to protect the interests of shareholders. All is fine and well with me.
12-27-2007 @ 2:02AM
Gumby said...
This time Wall Street was stupid for letting the stock down. Insiders are already buying them back again at low prices like 40 today..
12-28-2007 @ 8:23AM
John said...
Sorry Gumby about your loss! you must have bought @ $70 level. This FAD-FLYER is a dead horse! The insiders if doing as you say will wait for $10 max level.
2-19-2008 @ 8:21PM
Larry Johnston said...
OK... I said this at the end of last quarter and I'll say it again. PUMP and DUMP. All this guy said at the end of last quarter was wait until next quarter. C'mon... $65 to $70 is a PIPE DREAM for this stock. They didn't even get the patent approved in Europe where all the growth was supposed to be. You want to see what the demand is for these shoes check the Ebay,UK listings. This time last year they were paying 3 to 4 times what you would pay for them in the USA. Now they sell for a comparable cost. IF YOU WANT TO LOSE YOUR MONEY...LISTEN TO Georges Yared AND BUY CROX. How much do you think he made shorting it this time? And if he didn't...then he is just an TERRIBLE advisor!!!!!! This man should be ASHAMED to what he did to the MOM and POP casual investor!!!!!