What's Biting at Crocs?

My inbox filled up and my CAPS score took a bit of a beating when I last wrote about Crocs (NASDAQ:CROX) as a ghoulish trick for our Halloween special. Since that write-up, the shares are approximately 10% higher, and readers have been asking what I think of the company now. In the past month, there has been an earnings release and the lockup following the company's secondary offering expired, allowing insiders to sell their shares -- and sell they have -- so an updated look makes sense.

Before we start, I realize people love the company's product. I have no problem with that. I can think of quite a few companies that have products that I love as well, but loving a company's products and liking a company's shares are all very different things.

Then
When I last wrote about Crocs, I included the table below as a comparison to its competitors. Many people wrote in to tell me that Crocs is a rapidly growing company and that it isn't fair to compare it to these mature, slower-growing companies. There is some truth to this statement, particularly as it applies to a company like Nike. But I believe a company like Decker's Outdoor represents a best case long-term scenario for Crocs, because footwear is easily commoditized.

And now
With another quarter of earnings under its belt and some recent insider sales by Crocs' executives, the entire table should be updated. With today's data, we can see that the differences between Crocs and its competitors have narrowed. This is mostly because of higher earnings for Crocs in the most recent quarter and higher share prices for the other companies in the table pulling up their valuations. Still, Crocs' earnings are less than half of Timberland's, but the company has a market cap in the same ballpark.

Who's selling what
Insider selling is the other item of interest since I last looked at Crocs. I fully expected there would be some insider selling when the lockup expired following the company's secondary offering, but I am a bit surprised by how much has occurred. I am even more surprised by the combined amount of selling since before the company's secondary offering was announced in August. The table below highlights the change in ownership for four of the company's insiders, including its VP of sales and its CEO. The individuals in the table were highlighted because of their recent sales during the Thanksgiving holiday week.

So that's the data, but it is important to realize there is nothing illegal about selling shares and that insiders sell for many reasons -- including diversification, divorce settlements, new houses, new boats, and anything else that may catch their fancy. However, if the future of the company is as bright as is commonly believed by many shareholders, then why are the people who should know the most about the company's prospects reducing their ownership so drastically in such a short period of time? And why should new owners want to take their place? Interesting questions, I think. And ones that potential investors should consider.

Decker's Outdoor is a Motley Fool Hidden Gems selection.

At the time of publication Nathan Parmelee had no financial position in any of the companies mentioned.