Where Will Crox Stock Be In 10 Years?

Likely Crocs (NASDAQ:CROX) has fallen under your radar. It may even have been dismissed as a fad that has run its course, even if it did make a blip onto your watchlist at some stage.

But as you’re about to find out, this one-time high flying stock that captured the attention of consumers has made a serious comeback financially, growing sales and profits impressively, and expanding globally to make for a compelling investment opportunity.

Crocs Sales Hit $1 Billion 

A decade ago in 2013, when Crocs was really in the limelight and you could barely go anywhere without seeing people wearing the famous Croslite manufactured shoes, revenues were $1.19 billion.

Fast forward to the most recent quarter when management reported $1.072 billion in quarterly sales. It has some investors wondering what is the CROX stock forecast for 2023? Analysts estimate that sales for the fiscal year 2023 will reach $4.022 billion. 

So what does that mean for the stock, is Crox stock a buy or sell? Among ten analysts covering Crox, the consensus estimate places fair value at $135.10 per share, corresponding to a 41% rise in share price if it materializes. 

The fact that sales have quadrupled over the last decade is strong evidence that the Crocs management team is competent, efficient, and highly capable.

Look no further than the company’s operating income to see further evidence of that. Five years ago, EBIT or operating income was reported at $74.3 million. A year later it grew to $128.5 million, and then to $235.7 million the following year. In the past two years, operating income came in at $683.4 million and $898.1 million, respectively.

Crocs P&L Is Pristine, But There’s A Catch

While the profit and loss statement has been pristine over the past decade, growing top and bottom line figures at a rapid pace, the balance sheet isn’t sitting quite as pretty.

Yes, cash balances are looking relatively good with $191.6 million on hand but when compared to debt levels, it’s a bit more concerning. 

Total debt stood at $2.595 billion at the end of the last fiscal year, though management has been making a concerted effort to apply a good chunk of its revenues to pay down that amount, which currently sits – as of the most recent quarterly update – at $2.289 billion.

The debt burden is problematic, for sure, in a higher interest rate environment, but management has shown it can potentially offload it completely within about 7-8 quarters if it so chooses, assuming the same pay-down rate as the most recent quarter.

At that point, Crocs would be a cash flow machine, generating potentially north of $1 billion per quarter or $4+ billion annually with no debt. Given its current market cap of $5.75 billion, the current valuation is arguably a steal.

How High Will Crox Stock Go?

The highest forecast among the ten analysts covering Crocs is for the share price to hit $185. We investigated whether that’s reasonable.

At that price level, Crocs would have a market capitalization of around $11 billion. Now let’s fast forward two years to when management has paid off its entire debt, and can grow its cash balance at the same rate it had been paying down debt, $300 million per quarter. 

Each year, Crocs could grow its cash levels alone by $1.2 billion. Within 9 years, the company could grow its cash balance to equal that $11 billion. For the market cap to equal $11 billion then would mean the entire operations of the firm were valued at zero, which obviously makes no sense.

In other words, if you want to know where will Crox stock be in 10 years? The high analyst forecast of $185 per share is very reasonable given how fast management is growing revenues, and how quickly it can grow its cash balance after paying down its debt.

Is Crox a Good Long-term Investment?

Famously, Warren Buffett likes to examine companies in the S&P 500 with price-to-earnings ratios under 15. That’s good benchmark he assesses to determine if a company is trading at an attractive valuation.

By that measure, Crocs is an absolute bargain. So, is Crox a good long-term investment? CROX has a P/E ratio of 8.6x currently, a significantly lower level than is required by Warren Buffett to attract consideration.

Based on its P/E ratio alone, Crox appears to be a very good long-term investment. Other metrics support that assessment. For example, the company’s PEG is just 0.40, suggesting that the valuation is low relative to future earnings growth.

Even the price relative to last twelve months sales metric sits at just 1.5x, a very reasonable level.

When we ran our own discounted cash flow forecast analysis to assess whether CROX was on sale, we arrived at the same conclusion. Our calculations resulted in fair value of $144 per share, suggesting as much as 54.9% upside opportunity.

What Is Crox Dividend Yield?

If you’re considering CROX for income, unfortunately you’ll need to look elsewhere. Crocs does not pay a dividend yield at this time, and given its present debt levels it’s unlikely to do so anytime soon.

This is a pure play on buying shares and betting on them rising over time, not on receiving income from cash flows. 

As the company pays down its debt, builds its cash reserves and continues to increase cash flows, management may choose to pay out a dividend to shareholders but don’t hold your breath waiting for it.

Wrap Up

Crocs may have easily slipped through the net as you were fishing for investment opportunities, but from the time it made a splash with consumers a decade or so ago, it’s grown into a revenue-producing machine that’s paying down debt at a rapid pace, and is growing operating income rapidly too.

From a valuation perspective, Crocs trades at a low P/E ratio and rock bottom PEG. So too does the company look compelling from a cash flow perspective. Analysts, too, are bullish on the firm’s prospects with consensus estimates pegging intrinsic value significantly higher.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.