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

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  2. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  3. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  4. Investing News

    Is Buffett's Bet on Oil Right for You? (XOM, PSX)

    Oil stocks are getting trounced, but Warren Buffett still likes one of them. Should you follow the leader?
  5. Investing News

    Chipotle Served with Criminal Probe

    Chipotle's beat muted expectations and got a clear bill from the CDC, but it now appears that an investigation into its E.coli breakout has expanded.
  6. Stock Analysis

    Analyzing Sprint Corp's Return on Equity (ROE) (S)

    Learn about Sprint's return on equity. Find out why its ROE is negative and how asset turnover and financial leverage impact ROE relative to Sprint's peers.
  7. Stock Analysis

    Why Alphabet is the Best of the 'FANGs' for 2016

    Alphabet just impressed the street, but is it the best FANG stock?
  8. Investing News

    A 2016 Outlook: What January 2009 Can Teach Us

    January 2009 and January 2016 were similar from an investment standpoint, but from a forward-looking perspective, they were very different.
  9. Mutual Funds & ETFs

    3 Vanguard Equity Fund Underperformers

    Discover three funds from Vanguard Group that consistently underperform their indexes. Learn how consistent most Vanguard low-fee funds are at matching their indexes.
  10. Investing News

    Alphabet Earnings Beat Expectations (GOOGL, AAPL)

    Alphabet's earnings crush analysts' expectations; now bigger than Apple?
  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 >>
Trading Center