Hole-filled-shoe company Crocs (CROX 1.64%) is still trying to get back on its feet after a stumble in mid-2011 that cut the company's rich market capitalization in half. As so frequently occurs in the fashion world, Crocs' utilitarian shoes were all the rage until they weren't -- the very definition of a fad. These days, Crocs is a money-losing business, but recent losses were better than expected and gave hope to investors and analysts that management is steering the ship around. The company is in deep turnaround, with its CEO going out the door and the search for a new one under way. Crocs is still trying to find its way back to the good graces of the market and, much more important, the consumer.

One step at a time
Year over year, Crocs posted a wider loss in its fiscal fourth quarter. The company saw an adjusted $0.20-per-share loss -- a good bit more than 2012's $0.04-per-share loss.

Sales actually climbed slightly -- up 2% to $228.7 million. Both figures were above analyst estimates.

Throughout 2013, Crocs saw its U.S. business decline as customers just haven't caught on to the company's subsequent product offerings. Sales in Japan, where Crocs finds a huge portion of business, were down as well.

In the final quarter, though, things did look to be stabilizing a bit. On a constant currency basis, Crocs saw U.S. wholesale sales decline 8.8%. In the third quarter of last year, wholesale sales had plummeted nearly 19% on the same basis. Japan improved as well -- down just 1.9% in the just ended quarter, compared to 11% in the third quarter.

While the Americas remain Crocs' biggest segment, Asia-Pacific and Japan are perhaps more compelling regions for the company going forward. The biggest vote of confidence behind Crocs comes not from its financials but instead from a recent investor.

Back up
Private equity giant Blackstone recently announced a $200 million investment in Crocs. In isolation, this isn't an immediate green light to invest in Crocs, but it is a compelling factor. Blackstone has a deep retail history and will be a good advisor for getting Crocs back to a good place. Furthermore, it opens the door to greater investment or even a go-private transaction in the future. Neither would be bad for existing investors.

Absent of Blackstone's involvement, Crocs appears to be in better shape today than just a few months back. But as mentioned before, this is still a business underwater. We do not yet have any concrete evidence that Crocs' products are finding the demand they need to get the business moving toward profitability. It would be one thing if the stock traded at seven times earnings and was priced to sell, but it's still a relatively richly valued 18 times forward expected earnings. On an EV/EBITDA basis, things look better at 9.68 times trailing EBITDA. If the turnaround is successful, these numbers don't quite express the underlying potential, but that is still one big if. These levels still leave plenty of downside risk.

It's doing better than before, but investors should still tread carefully when considering Crocs.