There's no question that Crocs (CROX -2.23%) is firing on all cylinders right now. In the first quarter of 2022, the business reported revenue of $660 million, up 43.5% from the prior-year period. And adjusted earnings per share of $2.05, which was up from $1.49 in Q1 2021, exceeded Wall Street estimates.
While the business has not shown any signs of slowing down, especially in the uncertain economic environment we're in today, the stock has slumped 67% from mid-November. As of May 13, Crocs' shares are selling for a ridiculously cheap price-to-earnings ratio of just over five.
Should investors buy this beaten-down footwear stock?
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A perfect mix of growth and value
Crocs benefited from a major boost in demand throughout the pandemic, and that momentum doesn't appear to have slowed down. While many pandemic winners are seeing decelerating growth as a result of the reopening economy, Crocs' consumers are still craving the company's insanely popular foam clogs.
According to Piper Sandler's spring 2022 Taking Stock With Teens survey, Crocs' is now the sixth most popular footwear brand among the Gen Z demographic, up two spots from last year. Even more impressive, recently acquired HeyDude is in the top 10 for two consecutive surveys. And while historically, Crocs has fallen in and out of favor with consumers, its recent success indicates a brand poised to stay relevant for quite some time.
The company's marketing strategy, for example, focuses on staying ahead of cultural trends. Crocs partners with huge celebrities, like Justin Bieber and Bad Bunny, and other consumer brands, like Hidden Valley Ranch and Balenciaga, for designs and collaborations. The various product launches often sell out fast.
Business is going so well that management, led by CEO Andrew Rees, raised full-year guidance for 2022. Crocs is now expected to increase year-over-year sales by more than 50% to $3.5 billion, citing strong demand as the primary factor for the upgraded outlook
And if we look out even further, Crocs is on plan to generate $6 billion in annual sales by 2026, including $1 billion from HeyDude. To achieve this goal, management will continue to lean on its creative marketing strategy, boost digital revenue to 50% of the company, and increase sales of sandals fourfold to diversify away from foam clogs.
Furthermore, Asia will be a big part of Crocs' future growth plans. By 2026, the business plans to generate 25% of total sales from the continent. China, the world's second-biggest footwear market, could represent 10% of Crocs' total revenue in five years. There's still a ton of runway ahead for the company to become even more prominent on a global stage.
Shares of outstanding businesses that are doing remarkably well are still getting crushed in this tumultuous market environment. And Crocs hasn't been spared as it's down 55% this year. But this looks like an extremely rare opportunity for investors who are seeking both exceptional value and incredible growth.
