Company Profile (excerpt from Reuters): Crocs, Inc., incorporated on April 15, 2005, is engaged in the design, development, manufacturing, marketing, distribution and sale of casual lifestyle footwear and accessories for men, women, and children. The Company’s segments include Americas, Asia Pacific and Europe. Its products include footwear and accessories that utilize its closed-cell resin, called Croslite, as well as casual lifestyle footwear that use a range of materials. Its Croslite material enables the Company to produce non-marking, and odor-resistant footwear. As of December 31, 2016, the Company sold its products in over 90 countries through domestic and international retailers and distributors, and directly to consumers through its company-operated retail stores, outlets, e-commerce store sites and kiosks. The Company’s sales channels include wholesale, which includes distributors, Crocs owned retail and Crocs e-commerce.
Downloadable PDF version of this valuation:
ModernGraham Valuation of CROX – May 2018
Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?
What kind of Intelligent Investor are you?
| Defensive Investor; must pass 6 out of the following 7 tests. | ||||
| 1. Adequate Size of the Enterprise | Market Cap > $2Bil | $1,081,267,577 | Fail | |
| 2. Sufficiently Strong Financial Condition | Current Ratio > 2 | 2.46 | Pass | |
| 3. Earnings Stability | Positive EPS for 10 years prior | Fail | ||
| 4. Dividend Record | Dividend Payments for 10 years prior | Fail | ||
| 5. Earnings Growth | Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end | -117.88% | Fail | |
| 6. Moderate PEmg Ratio | PEmg < 20 | -75.69 | Fail | |
| 7. Moderate Price to Assets | PB Ratio < 2.5 OR PB*PEmg < 50 | 6.39 | Fail | |
| Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor. | ||||
| 1. Sufficiently Strong Financial Condition | Current Ratio > 1.5 | 2.46 | Pass | |
| 2. Sufficiently Strong Financial Condition | Debt to NCA < 1.1 | 0.00 | Pass | |
| 3. Earnings Stability | Positive EPS for 5 years prior | Fail | ||
| 4. Dividend Record | Currently Pays Dividend | Fail | ||
| 5. Earnings Growth | EPSmg greater than 5 years ago | Fail | ||
Stage 2: Determination of Intrinsic Value
| EPSmg | -$0.22 |
| MG Growth Estimate | -4.25% |
| MG Value | $1.04 |
| Opinion | Overvalued |
| MG Grade | D |
| MG Value based on 3% Growth | -$3.13 |
| MG Value based on 0% Growth | -$1.84 |
| Market Implied Growth Rate | -42.10% |
| Current Price | $16.35 |
| % of Intrinsic Value | 1575.60% |
Crocs, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the lack of earnings stability or growth over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.
As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $0.46 in 2014 to an estimated $-0.22 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.
At the time of valuation, further research into Crocs, Inc. revealed the company was trading above its Graham Number of $3.74. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was -75.69, which was below the industry average of 49.11, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $1.04.
Crocs, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D.
Stage 3: Information for Further Research
| Net Current Asset Value (NCAV) | $1.04 |
| Graham Number | $3.74 |
| PEmg | -75.69 |
| Current Ratio | 2.46 |
| PB Ratio | 6.39 |
| Current Dividend | $0.00 |
| Dividend Yield | 0.00% |
| Number of Consecutive Years of Dividend Growth | 0 |
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Most Recent Balance Sheet Figures
| Balance Sheet Information | 3/1/2018 |
| Total Current Assets | $463,769,000 |
| Total Current Liabilities | $188,622,000 |
| Long-Term Debt | $0 |
| Total Assets | $572,883,000 |
| Intangible Assets | $54,757,000 |
| Total Liabilities | $389,399,000 |
| Shares Outstanding (Diluted Average) | 71,668,000 |
Earnings Per Share History
| EPS History | |
| Next Fiscal Year Estimate | $0.23 |
| Dec2017 | -$0.07 |
| Dec2016 | -$0.43 |
| Dec2015 | -$1.30 |
| Dec2014 | -$0.22 |
| Dec2013 | $0.12 |
| Dec2012 | $1.44 |
| Dec2011 | $1.24 |
| Dec2010 | $0.76 |
| Dec2009 | -$0.49 |
| Dec2008 | -$2.24 |
| Dec2007 | $2.00 |
| Dec2006 | $0.81 |
| Dec2005 | $0.26 |
| Dec2004 | -$0.04 |
| Dec2003 | -$0.03 |
| Dec2002 | -$0.03 |
Earnings Per Share – ModernGraham History
| EPSmg History | |
| Next Fiscal Year Estimate | -$0.22 |
| Dec2017 | -$0.42 |
| Dec2016 | -$0.42 |
| Dec2015 | -$0.19 |
| Dec2014 | $0.46 |
| Dec2013 | $0.74 |
| Dec2012 | $0.75 |
| Dec2011 | $0.35 |
| Dec2010 | $0.00 |
| Dec2009 | -$0.24 |
| Dec2008 | -$0.02 |
| Dec2007 | $0.93 |
| Dec2006 | $0.33 |
| Dec2005 | $0.07 |
| Dec2004 | -$0.02 |
| Dec2003 | -$0.02 |
| Dec2002 | -$0.01 |
Recommended Reading:
Other ModernGraham posts about the company
Crocs Inc Valuation – Initial Coverage $CROX
Other ModernGraham posts about related companies
Disclaimer:
The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.
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