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Free Most Attractive Stocks Pick: Crocs Inc. (CROX)
Crocs Inc. (CROX: $109/share) is the featured stock from February’s Most Attractive Stocks Model Portfolio.
Crocs has grown revenue and net operating profit after tax (NOPAT) by 13% and 35% compounded annually since 2014, respectively. Crocs’ NOPAT margin increased from 4% in 2014 to 22% in 2024 while invested capital turns fell from 1.3 to 1.0 over the same time. Rising NOPAT margins are enough to offset falling invested capital turns and drive Crocs’ return on invested capital (ROIC) from 5% in 2014 to 22% in 2024.
Figure 1: Crocs’ Revenue and NOPAT Since 2014
Sources: New Constructs, LLC and company filings
Crocs Is Undervalued
At its current price of $109/share, CROX has a price-to-economic book value (PEBV) ratio of 0.9. This ratio means the market expects Crocs’ NOPAT to permanently decline by 10% from 2024 levels. This expectation seems overly pessimistic for a company that has grown NOPAT by 49% compounded annually since 2019 and 35% compounded annually since 2014.
Even if Crocs’ NOPAT margin falls to 20% (below 2024 NOPAT margin of 22% and five-year average margin of 21%) and the company’s grows revenue by just 3% (below ten-year compound annual growth rate of 13%) compounded annually through 2034, the stock would be worth $139/share today – a 28% upside. In this scenario, Crocs’ NOPAT would grow just 2% compounded annually through 2034. Should Crocs grow profits more in line with historical levels, the stock has even more upside.
Critical Details Found in Financial Filings by Our Robo-Analyst Technology
Below are specifics on the adjustments we made based on Robo-Analyst findings in Crocs’ 10-Qs and 10-Ks:
Income Statement: we made over $350 million in adjustments, with a net effect of removing over $50 million in non-operating income. Professional members can see all adjustments made to Crocs’ income statement on the GAAP Reconciliation tab on the Ratings page on our website.
Balance Sheet: we made just under $1.6 billion in adjustments to calculate invested capital with a net decrease of over $350 million. One of the most notable adjustments was for deferred tax assets. Professional members can see all adjustments made to Crocs’ balance sheet on the GAAP Reconciliation tab on the Ratings page on our website.
Valuation: we made just under $2.0 billion in adjustments to shareholder value, with a net decrease of just under $1.8 billion. The most notable adjustment was for total debt. Professional members can see all adjustments to Crocs’ valuation on the GAAP Reconciliation tab on the Ratings page on our website.
This article was originally published on February 21, 2025.
Disclosure: David Trainer, Kyle Guske II, and Hakan Salt receive no compensation to write about any specific stock, style, or theme.
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