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Crocs (Nasdaq: CROX  ) remains an ongoing train wreck. Unfortunately for its shareholders, this once-mighty momentum stock is looking closer to worthless all the time.

In conjunction with filing its most recent 10-K, Crocs disclosed that auditors Deloitte & Touche raised substantial doubts about its ability to continue as a going concern. I feel a bit vindicated, having said several times that I wasn't entirely convinced this company would survive the terrible economic climate and Crocs' status as a fading fad. (Was Microsoft's (Nasdaq: MSFT  ) Bill Gates a little addled to load up on Crocs' shares recently?)

Crocs has $51.6 million in cash and equivalents, but also $22.4 million in borrowings due April 2. In the latest fiscal year, its loss was $185.1 million, as revenue declined and it had to take one-time charges related to restructuring. The company said it is trying to extend its credit facility and negotiating to get an asset-backed lending arrangement. Crocs revealed in its 10-K that if it can't secure additional financing and keeps incurring losses, it may not be able to continue operating its business. According to the company, existing cash balances and cash flows are sufficient to operate through March 31, which a quick glance at the calendar reveals to be all too soon.

The "going concern" modification is significant and downright scary, but far from rare these days. General Motors (NYSE: GM  ) is an obvious high-profile example of a company haunted by concerns that it can't keep on keepin' on.

Given Crocs' precipitous fall from heady highs near $75 per share in late 2007, it's practically a poster child for faddish momentum stocks that can lead some investors to forget their common sense. (Even analysts succumbed, as I pointed out last summer in questioning Crocs' then-current consensus growth projections.)

True, most stocks have experienced terrible cuts as their growth faltered during the current economic difficulties. Unless you owned shares of, say, Wal-Mart (NYSE: WMT  ) or McDonald's (NYSE: MCD  ) , it's been hard for almost any investor to boast of outperformance lately.

Still, with Crocs, many investors paid a premium price for a shoe stock at high risk of exhibiting only fad-driven growth -- rather than truly sustainable growth -- and ignored important red flags such as burgeoning inventories. Hopefully, this can be a long-term lesson on the risks that individual investors should weigh very carefully when buying stocks.

Crocs is now trading at only about a buck per share, but as far as I'm concerned, it's a penny stock for a reason. Anyone who's still considering loading up on Crocs shares because they look "cheap" might as well buy a lottery ticket instead. There are plenty of cheap stocks out there, representing strong companies with much better survival chances. Walk away from Crocs.

Further foam-cell Foolishness:

Microsoft and Wal-Mart Stores are Motley Fool Inside Value recommendations. Try any of our Foolish newsletters today, free for 30 days.

Alyce Lomax does not own shares of any of the companies mentioned. The Fool has a disclosure policy.

Read/Post Comments (18) | Recommend This Article (12)

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  • Report this Comment On March 18, 2009, at 5:18 PM, Brettze wrote:

    Crocs make healthy shoes that benefits your body and mind. They are not plasticy shoes.. They are made of Croslite a soft space age like material that is so comfortable to wear. I guess too many people prefer to wear high heeled shoes and stiff leather shoes just to keep up with their brown noses... Brown nose on!!

  • Report this Comment On March 18, 2009, at 5:21 PM, Brettze wrote:

    Crocs make loafers, too. Not just beach types that is thought to be the only thing Crocs makes.. It is natural because beach types are what is being on the display for passer bys to see.. 99% of other crocs styles are not on displays and have to be ordered online. I was unsure about Crocs Cove a thong style but ordered it.. Was I glad I did?? You betcha!! It is the best looking thongs I ever had!! I am delighted!

  • Report this Comment On March 18, 2009, at 5:21 PM, mverna82 wrote:


  • Report this Comment On March 18, 2009, at 5:21 PM, Brettze wrote:

    Fad? No,,, Cynicism? YES !!

  • Report this Comment On March 18, 2009, at 5:25 PM, Brettze wrote:

    Go to and check out the assortment of styles and you will be surprised why nobody is talking about it.. What I dont understand is why Crocs dont stock it in shoe franchises like Sports Authority, Foot Lockers or like that.. Why Crocs is going online only, I dont understand... Crocs make great healthy shoes that will help improve our health .. Crocs does not make tight suffocating shoes.. They are relaxing and soo comfortable. I am going main Crocs now! I dont think that Crocs will go under.. Bill Gates can buy Crocs outright and he wont regret it.. Give it time.. We are not informed but all about Crocs as a fad which is not true anymore..

  • Report this Comment On March 18, 2009, at 5:27 PM, Brettze wrote:

    Yes of course Crocs still make ugly beach shoes but you dont have to choose them.. There is many other styles to choose . Many is simiilar to ordinary styles that you wouldnt know it from Crocs...

  • Report this Comment On March 18, 2009, at 5:30 PM, Brettze wrote:

    If you are tired of your own smelly feet, I think, Crocs is for you... Bacteria cannot grow on Croslite the material that Crocs use to make those styles.. Some is clad with leather, cloth, etc.. whatever! The soles remain Croslite and it is comfortable and space age like... Crocs dont make cheap plastic that get torn next week. Croslite is a strong material yet soft... If you look closely at it, you will understand that it is space age material!

  • Report this Comment On March 18, 2009, at 5:47 PM, Brettze wrote:

    I was at just a few mins ago to update myself .. I forgot to include that Crocs also make snow boots, rain boots, loafers. no slip shoes, sandals without the familiiar holes all around.. Crocs also has other lines that also makes running shoes, wlaking shoes, etc. also without the holes..

  • Report this Comment On March 18, 2009, at 5:52 PM, Brettze wrote:

    Bite under Crocs make golf shoes.. check it out... look like an excellent waterproof one to me... Golf courses can get really swampy in some places, you know..

  • Report this Comment On March 18, 2009, at 5:53 PM, ttboydxb wrote:

    I wonder if Brettze is a proud shareholder? Nice Job!

  • Report this Comment On March 18, 2009, at 5:55 PM, Brettze wrote:

    I thought that many of you read Peter Lynch's book.. He emphasizes the importance of visiting stores or factories to see the products for yourselves... If not, online stores then..

  • Report this Comment On March 18, 2009, at 5:55 PM, Brettze wrote:

    I am a proud wearer, too..

  • Report this Comment On March 18, 2009, at 7:11 PM, mattm09 wrote:

    You are a complete moron. You believe CPA's without question. Who do you think got the USA into this crisis anyway? Was it the local convienience store worker? You need to get a real job and do some real work. Those CPA's are just writing a bunch of crap to cover their own behinds. Which part of that do you not understand. I know you understand behinds since you probably sit on your behind all day and kiss other people's behinds in order to make a living. You are pathetic. Quit believing other people's opinion just because you wish for it to happen. I pray every day that shorts like you pay their dues. I will give up every cent I have (which is not much, I admit) to see the shorts lose every cent they have. That is a challenge to you shorts (in this stock and every other stock in the whole world). Am I angry? You bet. But at least I am not as much as an idiot as you are.

  • Report this Comment On March 19, 2009, at 3:07 PM, Brettze wrote:

    Alyce Lomax

    How come you didnt tell us all about those above? Hmm?

  • Report this Comment On March 19, 2009, at 3:09 PM, Brettze wrote:

    Crocs make decent shoes . for decent prices.. They are durable like heck!

  • Report this Comment On March 21, 2009, at 6:47 AM, hydrah wrote:

    Crocs are particularly popular in Africa because they are free. Churches collect them in America and they are sent by the crate to South Africa where they are used to prevent a number of diseases common to children who normally run barefoot. A number of studies are underway. Even if this company no longer is fashionable in America they will continue to make and eventually sell them in Africa and other parts of the world. This is an interesting company.

  • Report this Comment On March 23, 2009, at 3:53 PM, Brettze wrote:

    Crocs: Shoe Revolution!

  • Report this Comment On March 23, 2009, at 3:53 PM, Brettze wrote:

    I just ordered two pairs of new Crocs !!

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