Does Crocs’ cheap valuation make the stock a buy?

There is no doubt that Crocodile (CROX 4.09%) firing on all cylinders right now. In the first quarter of 2022, the company reported revenue of $660 million, up 43.5% from the prior year period. And adjusted earnings per share of $2.05, up from $1.49 in Q1 2021, beat Wall Street estimates.

Although activity has shown no signs of slowing down, especially in the uncertain economic environment we find ourselves in today, the stock has fallen 67% since mid-November. Since May 13, Crocs shares have been selling at a ridiculously low price price/earnings ratio just over five.

Should investors buy this beat stock of shoes?

Image source: Getty Images.

A perfect blend of growth and value

Crocs has enjoyed a surge in demand throughout the pandemic, and that momentum doesn’t appear to have slowed. While many pandemic winners are seeing slower growth as the economy reopens, Crocs consumers are still hungry for the company. incredibly popular foam clogs.

According to Piper Sandlerfrom spring 2022 Checking in with teens survey, Crocs is now the sixth most popular shoe brand among Gen Zers, up two spots from a year ago. Even more impressive, the recently acquired HeyDude is in the top 10 for two consecutive polls. And while Crocs has historically fallen out of favor with consumers, its recent success indicates a brand poised to stay relevant for quite some time.

The company’s marketing strategy, for example, aims to stay ahead of cultural trends. Crocs partners with big names, like Justin Bieber and Bad Bunny, and other mainstream brands, like Hidden Valley Ranch and Balenciaga, for designs and collaborations. The various product launches often sell out quickly.

Business is going so well that management, led by CEO Andrew Rees, has raised its full-year 2022 guidance. Crocs is now expected to increase year-over-year sales by more than 50% to 3.5 billion, citing strong demand as the main factor. for improved outlook

And if we look even further, Crocs expects to generate $6 billion in annual sales by 2026, including $1 billion from HeyDude. To achieve this goal, management will continue to build on its creative marketing strategy, drive digital revenue to 50% of the business, and quadruple sales of sandals to diversify away from foam clogs.

Additionally, Asia will figure prominently in Crocs’ future growth plans. By 2026, the company expects to generate 25% of its total sales on the continent. China, the world’s second-largest footwear market, could account for 10% of Crocs’ total sales in five years. There are still a ton of avenues to explore for the company to become even bigger on the world stage.

Stocks of outstanding companies that are doing remarkably well are still crushed in this tumultuous market environment. And Crocs has not been spared as it is down 55% this year. But it looks like an extremely rare opportunity for investors looking for both exceptional value and incredible growth.

Lee J. Murillo