Casual footwear provider Crocs (NYSE:CROX) reported first quarter results on Thursday and provided another indication that its namesake shoes and related accessories are more than a passing fad. The stock is also reasonably valued on and earning basis, and leaves room for upside surprises going forward.

Investopedia Broker Guides: Enhance your trading with the tools from today's top online brokers.
First Quarter Recap
Revenues increased 19.9% to $271.8 million. This was attributed to strong trends in Asia and the Americas regions. The only laggard was the European region, which reported a sales decline of 2.7%. Wholesale orders to outside retailers including Amazon (Nasdaq:AMZN), Dick's Sporting Goods (NYSE:DKS), DSW (NYSE:DSW), and Nordstrom (NYSE:JWN) grew 15.9% to account for 70.2% of total quarterly sales. Retail sales from the company's own retail, discount and online sources, jumped 33.2% to account for the rest of the top line.

The increase in sales costs lagged total sales growth and helped gross profits advance 21.5% to $144.8 million. SG&A cost controls helped push operating income up 34.6% to $36.1 million. Slightly faster income tax costs resulted in a net income increase of 31.8% to $28.3 million, or 31 cents per diluted share. Crocs did not provide cash flow details in the earnings press release.

SEE: Surprising Earnings Results

Outlook and Valuation
For all of 2012, analysts project total sales growth around 18% and total sales of nearly $1.2 million. The consensus earnings projection currently stands at about $1.45 per share and would represent annual profit growth of more than 15%. Combined with a current share price of about $20 per share equates to a forward P/E of 14.2.

The Bottom Line
Crocs hit a wall during the credit crisis and reported losses during both 2008 and 2009. But since then, sales have come back strongly. Its wholesale clients experienced similar trends and help explain the recovery in underlying demand. Crocs cash flow has also improved markedly and it generated approximately $1.12 in free cash flow last year.

The trailing free cash flow multiple of 18 is quite rich, but the forward P/E is much more reasonable. Crocs was once thought of as only a fad, but the past couple of years are suggesting that the brand has staying power as well as appeal on a global basis. It's not unreasonable to expect another few years of double-digit growth in sales and profits, as well as steady shareholder gains given the earnings multiple leaves room for share price upside.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Ryan Fuhrmann did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Stock Analysis

    Why did Wal-Mart's Stock Take a Fall in 2015?

    Wal-Mart is the largest company in the world, with a sterling track-record of profits and dividends. So why has its stock fallen sharply in 2015?
  2. Stock Analysis

    Allstate: How Being Boring Earns it Billions (ALL)

    A summary of what Allstate Insurance sells and whom it sells it to including recent mergers and acquisitions that have helped boost its bottom line.
  3. Options & Futures

    Cyclical Versus Non-Cyclical Stocks

    Investing during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
  4. Investing Basics

    How to Deduct Your Stock Losses

    Held onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
  5. Investing

    Retailers Rebel Against Black Friday: Bad Move?

    The Black Friday creep may have hit a wall as some stores are shutting their doors on Thanksgiving and even Black Friday to give employees the day off.
  6. Economics

    Is Wall Street Living in Denial?

    Will remaining calm and staying long present significant risks to your investment health?
  7. Stock Analysis

    When Will Dick's Sporting Goods Bounce Back? (DKS)

    Is DKS a bargain here?
  8. Investing News

    How AT&T Evolved into a Mobile Phone Giant

    A third of Americans use an AT&T mobile phone. How did it evolve from a state-sponsored monopoly, though antitrust and a technological revolution?
  9. Stock Analysis

    Home Depot: Can its Shares Continue Climbing?

    Home Depot has outperformed the market by a wide margin in the last 12 months. Is this sustainable?
  10. Stock Analysis

    Yelp: Can it Regain its Losses in 2016? (YELP)

    Yelp investors have had reason to be happy recently. Will the good spirits last?
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

Trading Center