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I admit, I've had my moments over the years when I absolutely despised the idea of investing in Crocs (Nasdaq: CROX ) . However, now that the fad has subsided, the company has survived, and the stock's no longer outrageously overvalued, Crocs actually looks like a reasonable stock to buy.
Art and innovation: Crocs has gotten past the fixation on its clogs, which are no longer the sizzling hot fad that peaked in 2007. Although Crocs has a new Jackson Pollock-inspired clog to celebrate the artist's 100th birthday (and the company's 10th anniversary), it also has a variety of other footwear styles to choose from.
Crocs' website showcases many shoes that would go seriously incognito when pounding the pavement, although they still include the legendarily comfortable Croslite material that's 100% Crocs. Think sandals, wedges, boat shoes, and even some dressy shoes. The company's also peddling tote bags, purses, and sunglasses.
Rising from the rubble: 2007 and 2008 were horrible years for Crocs, and for a while it looked as if it wouldn't even survive its problems as its faddishness subsided. As it turns out, the company has done an admirable job. In 2010 and 2011, Crocs returned to profitability and increased revenue by 22.3% and 26.7%, respectively. Its gross profit margin has also been traveling closer to levels it enjoyed in its headier past years.
Crocs also has opportunities in foreign markets. In its most recent 10-Q, you can see that Asian sales increased by 41% on a quarter-by-quarter basis. That's not shabby.
Shoe storms: Crocs' multiples look cheap right now; for example, the fact that it's trading at nine times forward earnings makes it cheaper than Wolverine World Wide (NYSE: WWW ) , which currently trades at 13 times forward earnings.
Meanwhile, many shoe companies seem to be disappointing investors lately. Crocs, Deckers (Nasdaq: DECK ) , Skechers (NYSE: SKX ) , and Nike (NYSE: NKE ) have all reported disappointing results recently, resulting in sharp drops in their stock prices.
Still, Crocs is cheaper than Nike, which trades at 15 times forward earnings and reported its first earnings miss and profit decline in years in late June.
Deckers is comparably valued, with a forward price-to-earnings ratio of eight (and an awfully sharp reliance on its Ugg boots, which aren't the most versatile around when it comes to seasonality).
Skechers is a super-risky stock given its inventory pile-ups and its $40 million settlement with the FTC regarding health claims related to its toning shoes. It also trades at an outrageous forward P/E of 26.
There could be opportunities in some shoe stocks right now, and Crocs looks like a particularly good buy right now, especially given its reduced focus on the old-school Crocs look.
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