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2023/04/07

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Is There Value Afoot in Crocs Stock?

Jody Chudley, Contributing Analyst, The Oxford Club

Jody Chudley

Last August, The Value Meter took a look at niche shoe manufacturer Crocs Inc. (Nasdaq: CROX) and rated the stock as "Slightly Undervalued."

I was impressed by the company's growth. The shoe brand had just seen second quarter 2022 sales increase 19% year over year.

Even better, despite this growth, the stock was trading at a very attractive single-digit price-to-earnings (P/E) ratio.

Since then, the stock market has taken a liking to it as well.

Crocs shares have jumped from $72 to $121. That's a 68% increase in just over six months!

Chart: Crocs Shares Find Their Footing
 

While I definitely liked the opportunity in Crocs shares last August, I did have one concern...

The company had recently spent $2.5 billion acquiring the rapidly growing Hey Dude shoe brand in February 2022.

I liked the acquisition but didn't love that Crocs had taken on a huge amount of debt to finance it.

Prior to the acquisition, Crocs' balance sheet was pristine. I hated to see that change.

But now - with a 68% rise in Crocs' share price and a bunch more debt - are shares overvalued?

LET'S FIND OUT
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