CROCS INC (NASDAQ:CROX): A Strong Value Pick with High Profitability and Low Valuation

The "Decent Value" screen finds stocks that may be priced lower than their fundamental worth, focusing on companies with good profitability and financial strength while trading at appealing prices. This method follows value investing ideas, where investors look for securities priced below their true value. The strategy selects stocks with a ChartMill Valuation Rating above 7, confirming they are priced better than similar companies, while also needing solid profitability (Profitability Rating), financial stability (Health Rating), and reasonable growth potential (Growth Rating). These factors help reduce risks tied to value traps, stocks that seem inexpensive but have declining business performance.

Why CROCS INC (NASDAQ:CROX) Is Notable

1. Low Valuation (Rating: 8/10)

CROX trades at a Price/Earnings (P/E) ratio of 8.05, well below the industry average (37.99) and the S&P 500 (27.93). Its Forward P/E of 7.91 strengthens its discounted position, making it cheaper than 90% of its peers in the Textiles, Apparel & Luxury Goods sector. The company’s Enterprise Value/EBITDA and Price/Free Cash Flow ratios also show a 76% and 86% discount to the industry, respectively. For value investors, these numbers suggest a possible safety cushion, where the stock’s price may not fully account for its earnings or cash flow potential.

2. High Profitability (Rating: 9/10)

CROX shows strong profitability, with a Profit Margin of 23.35% (leading its industry) and an Operating Margin of 24.84%, beating 98% of competitors. Its Return on Equity (ROE) of 48.63% and Return on Invested Capital (ROIC) of 21.12% reflect efficient use of capital. Strong profitability is important for value stocks, as it lessens the need for outside funding and supports steady earnings growth, key for determining true value.

3. Good Financial Health (Rating: 7/10)

The company’s Altman-Z score of 3.74 indicates low bankruptcy risk, while its Debt-to-Free Cash Flow ratio of 1.68 means it could repay all debt in less than two years. Though its liquidity metrics (Current Ratio: 1.52, Quick Ratio: 0.97) are not as strong, its solid solvency and steady cash flow ease concerns. Financial health matters for value investors, as it ensures the company can handle economic challenges without harming operations.

4. Steady Growth (Rating: 5/10)

While short-term growth is slow (EPS expected to rise 2.84% yearly), CROX has a strong past performance, with 5-year Revenue growth of 27.23% and EPS growth of 51.64%. Slower growth is common for established value stocks, but the company’s profitability and valuation offer protection. Value investors often favor stability over fast growth, making CROX’s fundamentals a fair balance.

Final Thoughts

CROX’s mix of low price, high profitability, and solid finances makes it an interesting pick for value-focused investors. The stock’s discount compared to peers and strong cash flow fit the safety-cushion idea, while its top-tier margins lower downside risks.

For investors looking for similar options, the Decent Value Stocks screen lists other stocks meeting these standards.

Disclaimer: This analysis is not investment advice. Investors should do their own research or speak with a financial advisor before making decisions.