What happened
Shares of Crocs (CROX 2.55%) were trading up 6% as of 10:16 a.m. ET after the company reported earnings results for the third quarter. Crocs reported revenue that was ahead of analysts' estimates but missed on earnings.
However, management raised its forecast for the full year, which has been rare for companies lately. Concerns over a weakening economy have sent the stock down 44% year to date, but investors are clearly taking notice of the stock's unbelievable value.
So what
Coming off a strong year of growth in 2021, the market has been bracing for a deceleration in revenue with sky-high inflation taking a toll on the consumer. But after reporting top-line growth of 44% and 51% in the first and second quarters, Crocs continues to report solid numbers.
Revenue accelerated again to 57% in the recent quarter. While much of that growth is due to the blistering sales increase from the Heydude brand, which nearly doubled revenue year over year, investors were pleased to see a strong back-to-school performance that gives the company strong momentum heading into the final quarter of the year.
It wasn't all good news, however, as higher costs in the supply chain pulled gross margin down to 54.9% from 63.9% in the year-ago quarter. This translated to lower growth in earnings, which still grew 20% year over year, but well below the rate of revenue growth.
Now what
The market was willing to look past the temporary spike in operating costs, given the healthy demand for the company's footwear. Management now expects revenue for the full year to be up between 49% and 52% over 2021.
With the stock cut nearly half this year, the high rate of growth was more than enough to justify a higher stock price after earnings. Indeed, the stock's forward price-to-earnings ratio of 7.2 looks like an incredible value for a company growing this fast.
