What happened

Shares of plastic shoemaker Crocs (CROX 1.53%) stock tumbled 14.6% through 3:15 p.m. ET despite a strong earnings report and pretty decent guidance Thursday morning.

Analysts expected Crocs to earn only $2.97 per share on $1.04 billion in sales in Q2 2023. As it turned out, Crocs beat those numbers on both the top and bottom lines. Earnings came in at a strong $3.39 per share, while sales just edged out the consensus target at $1.07 billion.  

So what

So if Crocs exceeded expectations, why is the stock down so much? That's an excellent question.

In a note out today, Wedbush Securities analyst Tom Nikic suggested investors might be underwhelmed by weak sales (3% growth) at Hey Dude, a shoe brand that Crocs spent $2.5 billion to acquire two years ago. And that's a valid point.

Still, direct-to-consumer sales of Hey Dude grew 30% in the quarter, which speaks to the brand's continued popularity with consumers. And overall sales grew 11% year over year, setting a "quarterly ... record" for the company. The Crocs name brand grew sales 14%, total e-commerce sales in the U.S grew 13%, and Crocs in Asia simply flew off the shelves -- up 33% year over year.

Granted, operating profit margins slipped a bit, down 60 basis points at 29.7%, but even so, the strong boost to sales more than made up the difference, and Crocs' earnings for the quarter grew 31% year over year.  

Now what

And even then, the good news wasn't over. Ordinarily, when earnings and sales beat but a stock sells off anyway, your first guess has to be that guidance wasn't great -- but Crocs' guidance was.

Management raised its forecast for the full year, predicting sales will be up about 13.5% as compared to 2022, surpassing the $1 billion mark. And while management didn't give guidance for earnings according to generally accepted accounting principles (GAAP), it raised its pro forma profit prediction to somewhere between $11.83 and $12.22 per share. Given that Wall Street was expecting only $11.57 per share, the whole range of Crocs' new forecast is ahead of expectations.

Now, assuming that Crocs' pro forma profit bears at least some resemblance to actual GAAP earnings, this implies that Crocs stock -- selling now for about $102 per share and expected to earn more than $12 a share -- costs a mere 8.5 times the current year's earnings. Even with Crocs paying its shareholders no dividend at all, that seems like an incredibly cheap price for a business growing its sales at a 13%-ish rate and holding its profit margins pretty steady.

Long story short: Even if investors are selling Crocs because one of its brands underperformed a bit today, well, its other big brand is doing just fine, and taking up the slack. On balance, Crocs still looks like a pretty great value stock to me.