Skechers U.S.A. (SKX 1.35%) and Crocs (CROX 1.79%) are both popular footwear companies whose shares outperformed in 2019. Sketchers shares are up about 71% over the last 52-week period, while Crocs shares are up 38%. Both companies beat the S&P 500's 26% return for the same time period. Both companies have a reputation for comfort and value, but target different audiences.

Consumers love Skechers for its broad range of shoes that are trendy and offer good value. Teenagers and comfort seekers have embraced Crocs' signature lightweight clog shoes, sending sales to record levels in 2019. Celebrities like Justin Bieber have been photographed in Crocs. Post Malone's latest collaboration with Crocs sold out in under two hours on Dec. 10.

Both companies had strong results for the latest quarter and impressive stock price moves. But one is the better investment.

A Sketchers storefront.

Image source: Skechers.

Recent results and growth prospects for each company

Crocs has been on a growth streak, reporting third quarter 2019 revenue growth of 19.8% year over year and earnings that easily beat analyst expectations. The shoemaker known for its clogs also raised full-year guidance. CEO Andrew Rees cited "another highly successful back to school season" for the strong quarter. Investors responded by sending shares up 16% after the earnings report.

Skechers also performed well during its latest quarter, with third-quarter results that topped analyst estimates for both sales and earnings. International revenues, comprising 59% of total sales, were quite strong, growing at 21.9% year over year. In contrast to Crocs' earnings report, Skechers guidance for the important holiday shopping season was not as strong as expected. The casual shoe company issued guidance that was in line with analyst forecasts for the fourth quarter.

Do consumers love the brand?

Crocs are very popular with teens right now. The brand is capitalizing on '90s nostalgia and its reputation as an "ugly" shoe. That ugly factor has made Crocs the seventh most popular footwear brand among teens in the Piper Jaffray fall Taking Stock with Teens survey. The clog seller has had great success with its collaborations with other brands like Vera Bradley and celebrities like Post Malone. Actress Zooey Deschanel is also a spokesperson for the brand.

In contrast, Skechers has built a reputation on comfort and value. It's done well with children (Skechers won Children's Brand of the Year at the 2019 Footwear Industry Awards), but not teens. Skechers is also the top brand in the U.S. for work, walking, and women's casual lifestyle shoes. International is an area of growth for the casual shoe company, with strength in Mexico and China. International sales were 59% of total sales, the highest in the company's history. Skechers management said they believe "international will continue to power Skechers' growth."

Valuation and the better investment

Skechers stock is trading at 17 times forward earnings, while Crocs trades at 22 times forward earnings. Compare that to competitor Nike's 29 times, and the consumer discretionary sector's 25 times. While trading at a much lower valuation than its competitor, Skechers is expected to grow its earnings by 15% in 2020 and 12% in 2021. Analysts expect Crocs to increase its earnings by 25% in 2020.

The earnings growth figure for Crocs is expected to be higher, but Skechers has a slight edge over Crocs in that its sales are less concentrated on one product family. It also sports a lower valuation. Crocs is more dependent on one key, signature product -- its popular clog shoe, making it more subject to trend risk. Sales of Crocs signature clog shoe comprise about 50% of its total sales. While shares of both companies look fairly appealing based on recent performance and future growth prospects, Skechers is the better bet given its lower valuation and more diversified revenue base.