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Strong Buy: Crocs Consistently Outperforms Estimates


The footwear company has exceeded expectations for more than three years, making it a great value stock.

Crocs, Inc. (NASDAQ:CROX) has been outperforming quarterly earnings estimates for more than three years now; most recently beating the Zacks Consensus Estimate by 14% in the third quarter of 2012. This Zacks Rank No. 1 (Strong Buy) footwear, apparel, and accessories company has a compelling valuation that makes it a solid value pick, including a price-to-earnings (P/E) multiple of 9.40.

Robust Bottom-Line Growth

On October 24, 2012, Crocs delivered third-quarter earnings of $.49 per share, surpassing the Zacks Consensus Estimate of $.43 and surging 48.5% from last year.

Revenue for the quarter increased 7.5% to $295.6 million, but fell short of the Zacks Consensus Estimate of $302 million. On the basis of channels, wholesale sales inched up 1.5% to $156.2 million, Internet sales rose 6% to $27.1 million, and retail sales soared 17.7% to $112.2 million.

On a constant currency basis, comparable-store sales climbed 1%. Gross profit jumped 9.2% to $160.7 million, whereas gross margin expanded 90 basis points to 54.4%.

Management forecasted break-even earnings and revenue of $220 million for the fourth quarter of 2012, which is scheduled to be reported on February 18, 2013.

Earnings Estimates

The Zacks Consensus Estimate for 2012 is currently $1.37, while the Zacks Consensus Estimate for 2013 is $1.55. These estimates reflect year-over-year growth of 10.5% and 12.8%, respectively.

Impressive Valuation

Crocs' P/E multiple remains below 15.0, suggesting a value stock. Its price-to-book (P/B) ratio of 2.04 and price-to-sales (P/S) ratio of 1.20 are lower than the industry averages of 5.60 and 1.81, respectively. The return on equity (ROE) also looks attractive with a trailing 12-month ROE of 25%, compared with the peer group average of 15.6%. It also has a PEG ratio of 0.92, which is less than one and indicates that the stock is reasonably valued given the long-term earnings growth projection of 10%.

Shares remain below 2012 and 2013 earnings estimate lines, reflecting that the stock is still undervalued. Volume averages roughly 2,285K daily.

Crocs offers footwear, apparel, and accessories for men, women, and children in the Americas, Europe, and Asia through company-owned locations, kiosks, and Web outlets. It designs, manufactures, and distributes casual and athletic shoes. The company provides its products under the brand names Crocs Work, Crocs Rx, Ocean Minded, and Jibbitz. Other stocks worth considering in the textile and apparel industry include Zacks Rank No. 1 (Strong Buy) G-III Apparel Group, Ltd. (NASDAQ:GIII) and Zacks Rank No. 2s (Buy) Gildan Activewear Inc. (NYSE:GIL) and Hanesbrands Inc. (NYSE:HBI).

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