Cryptocurrencies certainly were in the spotlight in 2021. The entire market has nearly tripled during the year and is worth $2.1 trillion today. Bitcoin, the largest cryptocurrency, has also had an excellent year. But that wasn’t enough to beat this booming stockpile.
You might be surprised to know that Crocs (NASDAQ: CROX)Ltd., the popular foam clog maker, saw its stock gain more than Bitcoin last year. And even after this outstanding performance, it is still trading at an attractive price.
Is it a no-brainer today?
A thriving shoe brand
Crocs has been on fire since the pandemic began in late 2019. Sales growth of more than 50% has been normal for the past four quarters. Crocs was truly an essential footwear brand for people who are constantly on their feet. But over the past 18 months, the growing interest of the general public in comfort has fueled demand.
The business uses an insanely effective marketing approach. Crocs collaborates with famous celebrities, such as Bad Bunny and Justin Bieber, as well as fashion houses, such as Balenciaga, to capture consumer interest. These models are often sold out soon after release. And while the average selling price for a pair of Crocs was $24.42 last quarter, the company holds a staggering 63.9% gross margin. Selling affordable shoes doesn’t mean having to sacrifice profitability.
It is worth noting how outstanding Crocs’ performance was, especially at a time when other clothing and shoe brands Struggling to deal with ongoing global supply chain issues. compared to nike And Lululemon, Crocs flagship product, foam sealer, very easy to assemble. The simple design requires only three basic components, allowing factories to quickly ramp up production if needed. This work helped to avoid the problems faced by competitors.
Management has huge ambitions
In December, it was announced Crocs will buy HeyDude, a privately owned casual footwear brand, for $2.5 billion in a cash and stock transaction. Crocs’ stock price fell 12% after the news as investors showed their disapproval of the deal. HeyDude is expected to immediately increase Crocs revenue, margins, and earnings growth. Furthermore, it allows Crocs to diversify its sales away from its popular foam clogs, which accounted for 82% of total business in the third quarter.
Excluding HeyDude, the leadership team expects revenue in 2021 to rise 67% year over year, up from previous guidance of 62% to 65%. “We remain incredibly confident in the Crocs brand and continue to expect to generate $5 billion in revenue by 2026, even before any revenue from HEYDUDE,” said CEO Andrew Rees.
From 2021 through 2026, Crocs is expected to increase sales 17% annually to reach the $5 billion goal. A focus on strengthening its digital presence, expanding sandal sales, driving growth in Asia, and continuing to innovate in product development and marketing will support Crocs’ outsized ambitions. By 2026, Crocs’ management team believes the company could generate more than $1 billion in annual free cash flow.
Crocs’ market capitalization of $8 billion today may point to a profitable buying opportunity if Reese and his associates can achieve these goals. Investors can snap up Crocs shares today at an inexpensive P/E ratio of just 12, well below Standard & Poor’s 50029. For such a fast-growing company and high-performing stocks, this sounds like a steal.
However, the biggest question mark with Crocs is whether it can remain relevant in the eyes of consumers. This will ultimately determine its long-term success. Moves by the management team, including collaborating with other brands and trying to diversify their product offerings, should bode well for Crocs in the coming years. As a result, the stock now looks like a disguised buy.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of the Motley Fool Premium Consulting Service. We are diverse! Asking about an investment thesis — even if it’s our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.