Crocs stock (NASDAQ: CROX) has declined by over 30% in the past six months, presenting what we believe to be an attractive value opportunity for investors. The recent downturn isn’t solely due to tariffs. CROX began its downward trend in mid-2024, with a notable drop in late October after reporting revenue declines from its acquired HeyDude brand. This decline was especially concerning as Crocs had incurred significant long-term debt to finance the acquisition. Furthermore, the latest tariff announcements have sparked a broad selloff in consumer discretionary stocks, disproportionately impacting Crocs given its manufacturing presence in countries like China and Mexico. For investors seeking growth with less volatility than individual stocks, the High-Quality portfolio offers a compelling option, having outperformed the S&P 500 with over 91% returns since inception.
Why Crocs Represents Strong Value Now
Despite these setbacks, investors who buy CROX now gain exposure to:
- A strong cash-generating company with a nearly 25% free cash flow margin, alleviating debt-related concerns
- A growth-focused business that has achieved around 23% annual growth over the last three years, despite recent hiccups
- A company that has preserved its core brand value while expanding higher-margin direct-to-consumer operations globally
- A business demonstrating more resilience to tariffs compared to rivals like DECK and SHOO
- A highly undervalued stock trading at a P/E ratio of just 6 — significantly cheaper than DECK, NKE, and SHOO, which trade at higher multiples despite weaker cash flow margins
But wait, there is more!
Technically, CROX appears poised for a rebound. The stock has a history of wide cyclical moves over the past four years and currently trades near a cyclical low. This level has previously acted as a launch point, sparking prolonged rallies in April 2021, November 2022 (post-consolidation), and again in November 2023.
Worried about CROX’s volatility? Consider the Trefis High Quality Portfolio, a set of 30 stocks that has consistently outperformed the S&P 500 over the past four years. Why? Because HQ Portfolio stocks deliver stronger returns with reduced risk — a smoother ride than the benchmark, as shown in HQ Portfolio performance metrics.
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