Crocs, Inc. (CROX) designs, manufactures and sells casual lifestyle footwear and accessories for men, women, and children. The company offers its various footwear products through wholesalers, retail stores, e-commerce sites, and third-party marketplaces.

In July, CROX announced the judgment of an infringement case against USA Dawgs and Double Diamond Distribution due to both companies’ sales of imitation Crocs shoes. The company obtained $6 million and $55,000 in damages, respectively, against the companies.

Daniel Hart, Executive Vice President and Chief Legal & Risk Officer at CROX, said, “This judgment not only reinforces the validity of our patent rights, it also reinforces our unrelenting determination to take forceful steps to protect our brand equity.”

CROX gained 47.2% in July. However, the stock is down 40.1% year-to-date to close its last trading session at $76.80. It has gained 1.6% intraday.

Here are the factors that could affect CROX’s performance in the near term:

Mixed Financials

For the fiscal second quarter ended June 30, CROX’s revenues increased 50.5% year-over-year to $964.58 million. However, its net income and net income per common share came in at $160.32 million and $2.58, down 49.7% and 47.7% from the same period a year ago.

Mixed Valuations

In terms of its forward non-GAAP P/E, CROX is trading at 7.59x, 43.2% lower than the industry average of 13.35x. The stock’s forward non-GAAP PEG multiple of 0.36 is 68.7% lower than the industry average of 1.15.

However, in terms of its forward EV/Sales, it is trading at 2.19x, 82.4% higher than the industry average of 1.20x. Its forward Price/Book multiple of 5.19 is 90.8% higher than the industry average of 2.72.

Wall Street Expects Modest Upside

Two of the eight Wall Street analysts rating the stock have rated it Hold. The 12-month median price target of $84.38 indicates a 9.9% potential upside. The price targets range from a low of $54.00 to a high of $116.00.

POWR Ratings Don’t Indicate Enough Upside

CROX has an overall rating of C, which equates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

CROX has a Growth and Value grade of C in sync with its mixed financials and valuations. The stock also has a C grade for Momentum, consistent with the stock trading above its 50-day Moving Average of $58.81 but below its 200-Day Moving Average of $94.75.

In the 67-stock Fashion & Luxury industry, it is ranked #53.

Click here to see the additional POWR Ratings for CROX (Stability, Sentiment, and Quality).

View all the top stocks in the Fashion & Luxury industry here.

Bottom Line

The stock has been soaring in price lately. However, capital market company Victory Capital Management Inc. shed 86% of its position in CROX in the first quarter. Several other hedge funds have also reduced their positions in the company.

Moreover, given its mixed financials and valuations, it might be wise to wait for a better entry point in the stock.

How Does Crocs, Inc. (CROX) Stack Up Against its Peers?

While CROX has an overall POWR Rating of C, one might consider looking at its industry peers, J.Jill, Inc. (JILL) and Hugo Boss AG (BOSSY), which have an overall A (Strong Buy) rating, and Chico’s FAS, Inc. (CHS) and H & M Hennes & Mauritz AB (publ) (HNNMY), which have an overall B (Buy) rating.

CROX shares were trading at $76.45 per share on Friday morning, down $0.35 (-0.46%). Year-to-date, CROX has declined -40.38%, versus a -10.56% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...

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