CROX [July 2012]

I think CROX is definitely too cheap. It is expanding their line of products reducing the dependence of the traditional Crocs and gaining a lot of acceptance in some workplaces like hospitals. They went through a major reestructuring process in 2008 and 2009 and now seem to be better than ever. 

The increasing exposure to Asian markets is driving revenues to levels higher than the pre-crisis'. Also Crocs, Inc keeps generating positive cash-flow, and in this world.. Cash-flow is King! 

With its proprietary closed cell resign Croslite(tm), Crocs is recognized all over the world. Although it competes with other footwear companies, retailers and wholesalers, Crocs have a very specific design and people love it. Anyway, when compared to its peers you can see Crocs is way too cheap. 

On the downside, as it needs to expand its line of products in order to reduce the dependence of the traditional Crocs, it needs to use other raw materials and that means gross margin should decrease. Also, as it expands the number of self-operated retail stores, rents increase and operating margins should decrease. But the fact is that increasing volume and pricing power are actually sustaining gross margins and even improving Operating Margins, especially in Asia and Americas.

Technical Analysis might show some weakness as the share price keeps going down, finding new 52-week lows. This is mostly because of bellow expectations guidance issued by the company. I think investors overreacted because the company is trading at cheap valuation multiples and the fact is that the company keeps recording good results.

In summary, I think it's a great investment opportunity with huge upside potential but the price needs to show some more recovery signals. This Wednesday, 25th July company is expected to annouce Q2 2012 results.