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Crocs, Inc. Message Board

  • pk_02115 pk_02115 Dec 16, 2012 4:56 PM Flag

    Doing due diligence on CROX - what am I missing?

    This came on my radar recently and I'm digging into the stock. So far I only see positives, including:

    - no debt
    - large cash position
    - strong margins
    - strong ROE
    - growing revenues
    - emerging market presence
    - relatively simple product and business model
    - low to moderate valuation metrics
    - management buying back shares at $12-$13 range
    - recent increase in their line of credit (with ability to buy back shares) by three very savvy & conservative banks at a low rate spread

    I'm thinking it looks a little too good to be true and I'm not sure what the catch is. Brainstorming on the subject gives me the following list of potential negatives (from the market's perspective, not mine):

    - goofy product not taken seriously or perceived as ugly/fad/kids only, leading to institutional fear (no money manager wants to risk losing money and losing face on Crocs, the old Peter Lynch theory)
    - counterfeiting risks, lack of patent protection or ability to prevent cheap knockoffs
    - no traction with new (no clog) shoe designs
    - growth unsustainable for some reason
    - AR, AP and inventories seemed to up substantially last quarter (but so were sales)

    Any thoughts from any longs or shorts out there?

    Thanks in advance for useful feedback and a productive discussion.


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