Is Crocs Really a Terrible Stock?

Sometimes unloved stocks are good stocks that have just rubbed investors the wrong way, and actually represent great investment opportunities. Quite often, though, unloved stocks are unloved because there is something very wrong with either the stock or the company behind the stock.

In the Motley Fool's CAPS community, stocks are rated on a scale of one to five stars based on the ratio of outperform and underperform ratings given to them by CAPS members. Stocks with the worst ratios end up with a one-star rating -- which is the CAPS equivalent of a flashing red warning beacon.

One of the stocks that has landed that dreaded one-star rating is Crocs (Nasdaq: CROX  ) . Crocs is, of course, known for the oh-so-recognizable hole-y clogs that it makes with its proprietary Croslite material. The hope for Crocs was that the company would continue to expand its product offerings and become a shoe powerhouse.

However, recent losses -- including a $22 million bite in the first quarter -- suggest that long-held suspicions that the product is a fad may be true.

To get a better idea of why Crocs is so unloved, let's take a look at how it stacks up against some comparable companies.

Company

TTM Net Income Margin

TTM Return on Equity

NTM Price-to-Earnings Ratio

CAPS Rating
(out of 5)

Crocs

(30.8%)

(56.5%)

NM

*

Nike (NYSE: NKE  )

8.4%

20.7%

15.4

****

Skechers (NYSE: SKX  )

2.2%

4.6%

13.5

****

Deckers Outdoor (Nasdaq: DECK  )

10.3%

21.1%

9.4

**

Timberland (NYSE: TBL  )

3.1%

7.0%

18.8

*

Source: CAPS and Capital IQ, a division of Standard & Poor's.
TTM = trailing 12 months. NTM = next 12 months.
NM = Not meaningful; Crocs is expected to be unprofitable over the next 12 months.

After examining the table above, is there any wonder why Crocs has been stuck with a one-star rating? Timberland shares Crocs' ignominious single-star fate, but it has managed to at least stay profitable.

But to get more specific, let's take a look at what CAPS All-Star rwilso01 had to say when giving Crocs stock a thumbs-down in April:

They will go bankrupt. The loan extension will not give them enough time to turn thiings around. They invested thinking they would continue to grow but they are just a fad.

Now I'm going to toss the ball in your court. Is Crocs a stock worthy of a rock-bottom rating? Or has the CAPS community overlooked the company's potential? Head over to CAPS and let the 135,000 community members know how you feel.

And if it feels good to jab your thumb down on a stock, you may want to check out Ford (NYSE: F  ) and Vonage (NYSE: VG  ) , both of which have been out of favor among Crocs bears.

Further Foolishness:

Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. Cemex is a Motley Fool Stock Advisor and Motley Fool Global Gains pick. Suntech Power is a Rule Breakers selection. The Fool owns shares of Cemex. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool. The Fool's disclosure policy suffers Fools gladly.


Read/Post Comments (12) | Recommend This Article (15)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 17, 2009, at 3:28 PM, rre55 wrote:

    one thing i hate and it's when i see no honest by the magazin.

    moley is a bad magazin, when crox was $1 they said sell.

    they hate the company in any case.

    they are on the short side i hope for a squeeze just for them.

    ugly magazin,everyone hate them.

    baaaaaaaaaaaaaaaaaa

  • Report this Comment On June 17, 2009, at 3:29 PM, rre55 wrote:

    bad table, you can't take nke and crox at the same table.

    it's not a good table.

    crox will see $5 in 1 week.

  • Report this Comment On June 17, 2009, at 3:34 PM, rre55 wrote:

    how much did they pay you to bash this company?

  • Report this Comment On June 17, 2009, at 6:33 PM, TMFKopp wrote:

    @rre55 -

    I'm happy to address your concerns regarding Crocs, but you haven't mentioned any reason that the stock isn't a disaster. Why not lay out a case for the stock/company rather than simply saying that I'm terrible for calling the stock terrible?

    Better still, why not go to CAPS (http://caps.fool.com) and share your case with the entire CAPS community?

    Matt

  • Report this Comment On June 18, 2009, at 2:11 AM, fsmcheung wrote:

    I am actually quite positive on crox. New CEO, high gross margin, renowned brand name worldwide, 11.6% short interest ratio, products still very popular (7 out of 10 bestselling shoes at Amazon's website)

    New management said savings from restructuring will flow through to P&L by the end of this year & return to profitability next year. If I were the new management, I would guide down the market, so that it would be easier to beat the market expectation

  • Report this Comment On June 18, 2009, at 1:41 PM, asll wrote:

    Why is MF so obsessed with crocs?

    You and your fools are looking thru the rear view mirror, so of course all you can see is the disastrously bloated crocs which crashed when the recession hit (and the fad wore thin if not completely off).

    What's left is the no-fad portion of the company -- devoted customer base, world-wide, proven brand, and no debt with profitability next year after its fundamental re-sizing and strategic re-structuring.

    The fools, 95% male traders or wannabees, who think crocs were just a fad, or only worn by gay clowns, are obviously NOT crocs target market, so how can they be taken seriously?

  • Report this Comment On June 19, 2009, at 8:53 PM, zummy1 wrote:

    The Motley guys probably lost so much money by buying at $70, now they are pissed. I bought at $1.10

    and have close to 300% gain. Too bad they are truely fools. Also maybe they have bets against the stock

  • Report this Comment On June 20, 2009, at 9:57 PM, GenoaJenn wrote:

    OK, I do almost no trading (I don't have control over what companies my 401 k invests in)... Instead, I'm a Crocs™ wearer... part of that "core target market" member "asll" talks about in his review.

    As a rule, I'm not a fashionista -- I'm probably more of an anti-fashionista. I'm a comfort-maven!

    I buy at least 3 pairs of CrocsRx™ Silver Cloud™ and or Relief™ shoes per year over the last 4 or 5 years at $39.99 per pair -- that's more pairs of shoes per year than I've purchased since high school, when I HAD to have the latest "hot" sneakers every 2 or 3 months (Hey, I was young once, too.)

    This year, I bought two pairs of Crocs™ summer sandals ($25 and $30) and a pair of Mammoth Clogs ($40) along with my annual purchase of the CrocsRx™ and I plan to buy another pair soon... I own three other pairs of "comfortable" shoes, two of which I bought over 3 years ago that I paid close to $100 for each pair. I barely wear them and I only wear them when necessary and I take them off as soon as possible and put on my Crocs™. I even keep a pair of Crocs™ in the car for quick-changes.

    Why?

    THEY ARE COMFORTABLE, DURABLE AND LIGHT WEIGHT.

    Yeah, they're funny looking and come in some of the most outrageous colors, like Electric Neon Magenta, but I love to wear them... and my feet love them, too.

    I have some foot problems that regular shoes make worse. I'm not diabetic, but my podiatrist recommends them to all her patients with diabetes and other foot ailments, such as arthritis and, like me, Plantar Fasciitis sufferers.

    I've tried several other shoes and supports, costing hundreds of dollars per pair, but I can't find anything that works as well as CrocsRx™.

    I'm not saying they are a treatment for a particular medical problem, but I can't really wear any other shoe WITHOUT foot pain, except for Crocs™.

    My belief in this ugly but comfortable shoe moves me to respond to detractors with "Try them! You'll LOVE them!

    If I had the money, I'd buy a lot of Crocs™ stock... but I'm just the peon who works for a living... while wearing Crocs™.

  • Report this Comment On June 26, 2009, at 4:21 PM, JamesNHollywood wrote:

    I think it's fairly obvious that "GenoaJenn" post was written by the Crocs Marketing department and approved by Legal affairs. I counted no less than a dozen (TM)'s in that post.

    That being said, I own Crocs and enjoy wearing them around the house, but wouldn't be caught dead wearing them in public.

    It was gross mismanagement of their inventories at the store level that got them in trouble, hopefully they learned enough from those mistakes to turnaround the enterprise.

    The stock should be trading in the $6 - $7 range by years end.

  • Report this Comment On July 10, 2009, at 5:05 PM, reardy1 wrote:

    i just got back from florida and we stopped in st augustine i was on the look out for some sunuk sandles had no luck so we went into the crocs store and my 11 yr old who loves crocs said dad try them ,i bought the canvas looking ones i thought they were for kids i am 54 yrs old well i think these are the most comfortable shoe i am a big guy and they have great support also the store was the only one packed with people so i went online to check the stock wow what a ride for the early investor i can see how it could make some people hate the stock but i think it has a lot of potential if the company keeps producing a quality product and adds new lines i bought some shares, the charts tell me the risk is worth it good luck

  • Report this Comment On July 31, 2009, at 7:15 AM, lalabronx wrote:

    + and -

    + Stock has unfilled gaps at much higher levels. Sales, while down, are still at $0.5 B annual rate. The shoes are still being bought - at summer pool, worn by many kids and some adults. Expanding fall line to be more fashionable. Shoes are very comfortable - great for older adults with foot problems.

    Cutting costs, Neglible debt

    - Lack of insider buying (management is evangelical about brand but does not put money where mouth is), Losing money - cost cutting is not enough, they ultimately have to grow/double sales from current levels

  • Report this Comment On October 08, 2012, at 8:40 PM, tommyjohnson1956 wrote:

    I know that Crocs are amazing and I love to wear them, but I have still had my share of foot problems and I think you should visit <a href="http://www.elmhurstpodiatry.com">podiatric sports medicine il</a> to find out how to fix your foot problems too.

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