Has Crocs Finally Reached the Bottom?

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Shares of Crocs (NAS: CROX) hit a 52-week low yesterday. Let's take a look at how the company got there to find out whether cloudy skies remain on the horizon.

How it got here
This formerly high-flying footwear company fell apart after offering disappointing guidance last October. It wasn't the only shoemaker to feel the sting of reduced expectations -- Deckers Outdoor (NAS: DECK) has been tracing its own 52-week lows ever since its third-quarter earnings report began raising red flags for investors.

CROX Total Return Price Chart


CROX Total Return Price data by YCharts

Many of their peers, on the other hand, recently reached 52-week high points. Nike (NYS: NKE) reached new highs in May before falling back on underwhelming earnings. Under Armour (NYS: UA) followed with a 52-week high of its own last month, and SKECHERS (NYS: SKX) wasn't far behind in making its own major gains.

Crocs has been somewhat lost in the wilderness since its October horror show. The stock popped entering 2012 after the company offered a bit of good guidance for a change, but Crocs' leadership lowballed guidance again with its fourth-quarter earnings. In April, another sell-off ensued over -- wait for it -- weak guidance. Beginning to notice a trend?

What you need to know
All this backsliding somewhat obscures something important: Crocs is trading at its cheapest valuations in some time. Deckers has a lower P/E, but negative free cash flow. SKECHERS has an appealing price-to-free-cash-flow ratio, but reports negative earnings. Crocs has valuations in both categories that are far cheaper than Nike's, and has a better net margin to boot. Take a look:

Company

P/E Ratio

Price to Free Cash Flow

3-Year Annualized Earnings Growth

Net Margin (TTM)

Crocs10.718.8NM11.4%
Deckers9.7NM17.1%13.2%
SKECHERSNM7.4(250.9%)  5.6%
Under Armour48.1NM28.2%6.4%
Nike19.233.915.1%9.7%

Source: Morningstar. TTM = trailing 12 months. NM = not material.

Those making the argument that Crocs' struggles have opened up a buying window seem to have the numbers on their side. Fool contributors Tim Beyers, Alyce Lomax, and Keith Speights have all offered positive support over the past two months. For more background on their rationale, visit their articles by clicking the links below:

What's next?
Where does Crocs go from here? That will depend on its ability to keep growing in spite of underwhelming guidance. Crocs is still a young company, and its increasingly diverse product line should help drive that growth.

The Motley Fool's CAPS community is not very keen on Crocs, though. Our stockpicking community has given the footwear company a lowly one-star rating, with only 65% of our CAPS All-Stars who've rated it expecting the stock to reverse its 52-week trend and finally beat the market.

Interested in tracking this stock as it continues on its path? Add Crocs to your Watchlist now for all the news we Fools can find, delivered to your inbox as it happens. If you're looking for a basket of great consumer stocks making a splash overseas, The Motley Fool's got three ideas for you. Nike happens to be one, but to find out the others, all you have to do is get a copy of our free report: "3 American Companies Set to Dominate the World."

At the time this article was published Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more news and insights.The Motley Fool owns shares of Under Armour. Motley Fool newsletter services have recommended buying shares of Deckers Outdoor, Skechers, Nike, and Under Armour. Motley Fool newsletter services have also recommended creating a diagonal call position in Nike and a bear put spread position in Under Armour. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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