Why Shares of Crocs Went Out of Style

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of shoemaker Crocs (Nasdaq: CROX  ) fell 10% today after the company disappointed investors with its earnings outlook.

So what: Revenue reached $271.8 million, just barely topping estimates. Earnings per share were $0.32 on a non-GAAP basis, $0.06 higher than estimates. So why did the stock drop? The company outlook for the second quarter was for $335 million to $340 million in revenue and $0.61 to $0.63 per share in earnings. Analysts had expected $352.7 million in revenue and $0.65 in earnings per share next quarter.

Now what: Revenue did increase 20% and net income jumped 32%, so the sell-off today is overdone in my eyes. The company is now trading with a trailing P/E ratio of 16, a great value considering the growth rate. I have my reservations about Crocs long-term, but I don't see this earnings report as a reason to sell shares.

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