Sometimes unloved stocks are good stocks that have just rubbed investors the wrong way, and actually represent great investment opportunities. Quite often, though, unloved stocks are unloved because there is something very wrong with either the stock or the company behind the stock.
In the Motley Fool's CAPS community, stocks are rated on a scale of one to five stars based on the ratio of outperform and underperform ratings given to them by CAPS members. Stocks with the worst ratios end up with a one-star rating -- which is the CAPS equivalent of a flashing red warning beacon.
One of the stocks that has landed that dreaded one-star rating is Crocs (NASDAQ:CROX). Crocs is, of course, known for the oh-so-recognizable hole-y clogs that it makes with its proprietary Croslite material. The hope for Crocs was that the company would continue to expand its product offerings and become a shoe powerhouse.
However, recent losses -- including a $22 million bite in the first quarter -- suggest that long-held suspicions that the product is a fad may be true.
To get a better idea of why Crocs is so unloved, let's take a look at how it stacks up against some comparable companies.
|
Company |
TTM Net Income Margin |
TTM Return on Equity |
NTM Price-to-Earnings Ratio |
CAPS Rating
|
|---|---|---|---|---|
|
Crocs |
(30.8%) |
(56.5%) |
NM |
* |
|
Nike (NYSE:NKE) |
8.4% |
20.7% |
15.4 |
**** |
|
Skechers (NYSE:SKX) |
2.2% |
4.6% |
13.5 |
**** |
|
Deckers Outdoor (NASDAQ:DECK) |
10.3% |
21.1% |
9.4 |
** |
|
Timberland (NYSE:TBL) |
3.1% |
7.0% |
18.8 |
* |
Source: CAPS and Capital IQ, a division of Standard & Poor's.
TTM = trailing 12 months. NTM = next 12 months.
NM = Not meaningful; Crocs is expected to be unprofitable over the next 12 months.
After examining the table above, is there any wonder why Crocs has been stuck with a one-star rating? Timberland shares Crocs' ignominious single-star fate, but it has managed to at least stay profitable.
But to get more specific, let's take a look at what CAPS All-Star rwilso01 had to say when giving Crocs stock a thumbs-down in April:
They will go bankrupt. The loan extension will not give them enough time to turn thiings around. They invested thinking they would continue to grow but they are just a fad.
Now I'm going to toss the ball in your court. Is Crocs a stock worthy of a rock-bottom rating? Or has the CAPS community overlooked the company's potential? Head over to CAPS and let the 135,000 community members know how you feel.
And if it feels good to jab your thumb down on a stock, you may want to check out Ford (NYSE:F) and Vonage (NYSE:VG), both of which have been out of favor among Crocs bears.
Further Foolishness:
