We came across a bullish thesis on Crocs, Inc. (CROX) on Substack by Taylor Nichols. In this article, we will summarize the bulls’ thesis on CROX. Crocs, Inc. (CROX)’s share was trading at $89.46 as of April 21st. CROX’s trailing and forward P/E were 5.63 and 7.05 respectively according to Yahoo Finance.
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Crocs, Inc. (CROX) has delivered another record-breaking year in 2024, achieving $4.1 billion in revenue, marking a 4% year-over-year increase. The company’s adjusted gross margins expanded to 58.8%, up nearly 3 percentage points from 2023, showcasing its operational efficiency. The core Crocs brand experienced an impressive 8.8% growth, offsetting the softer performance from the HEYDUDE acquisition. Operating margins consistently hover around 20%, exceptional for a footwear company, while generating free cash flow of $923 million in 2024 alone, converting over 22% of revenue directly to free cash flow—a level most retailers can only aspire to.
Crocs has demonstrated strategic capital allocation, effectively balancing offensive and defensive financial strategies. In 2021, the company issued long-term debt at historically low rates (below 4.5%) to fund a $1 billion share buyback, capitalizing on favorable market conditions. In 2022, Crocs acquired HEYDUDE for $1.6 billion, diversifying its product mix, though the brand has remained relatively flat at around $900 million annually. Since then, Crocs has been systematically paying down debt, repaying $323 million in 2024, while continuing aggressive share repurchases, spending $551 million to buy back 4.3 million shares in the same year. In February 2025, the board authorized an additional $1 billion for buybacks, bringing the total authorization to $1.3 billion—more than 25% of the company’s current market cap—demonstrating strong confidence from management and providing significant support for the stock.
Despite its strong financial performance, Crocs trades at a P/E of approximately 5.55, the lowest among key footwear competitors. This valuation gap exists despite Crocs demonstrating higher gross margins (57.9%), operating margins (~20%) that lead the industry, superior inventory turnover, and best-in-class ROE and ROIC metrics. The market appears to be undervaluing Crocs, pricing it as if its current performance is a temporary blip before an inevitable decline, a sentiment not supported by the data.
Analyst consensus reflects a more optimistic outlook, with an average price target of $124, suggesting upside potential of 30-60% from current levels. Crocs has demonstrated consistent revenue growth over multiple years, with record annual revenues of $4.1 billion in 2024, representing a 4% increase year-over-year. The company generated $923 million in free cash flow in 2024, approximately 22% of revenue, showcasing exceptional cash conversion. While the stock has experienced significant price movements around earnings releases, the underlying business fundamentals have remained consistently strong, indicating that market perception, rather than business reality, is driving the valuation gap.
International expansion presents additional growth opportunities. China has emerged as Crocs’ second-largest market, now contributing approximately 6% of total sales. This international diversification not only provides growth opportunities but also some insulation from regional economic fluctuations. The brand mix tells an interesting story; while the HEYDUDE acquisition created a second revenue stream, the core Crocs brand continues to grow steadily, generating more than 75% of total revenue.
Crocs outsources 100% of its manufacturing to third-party partners, primarily in Vietnam (53% of production) and China (around 15% of U.S. imports), with newer capacity in India (now at 10% of production) and other countries. This strategy offers operational flexibility and keeps fixed costs low but introduces geopolitical and supply chain vulnerabilities. For 2025, new tariffs on imports from China and Mexico are expected to reduce gross profit by approximately $11 million—about 25 basis points of margin impact. Management is addressing this through ongoing supplier diversification, but it remains a key risk to monitor.
In summary, Crocs represents a compelling investment opportunity, combining strong financial performance, strategic capital allocation, and growth potential, yet trading at a significant discount to its intrinsic value. The company’s consistent execution, aggressive share repurchases, and potential for multiple expansion position it well for significant returns in the coming years.
Crocs, Inc. (CROX) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 41 hedge fund portfolios held CROX at the end of the fourth quarter which was 42 in the previous quarter. While we acknowledge the risk and potential of CROX as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CROX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.