Crocs, Inc. (CROX), Deckers Outdoor Corp (DECK): Is There Upside for This Footwear Business?

NIKE, Inc. (NYSE:NKE) is the largest business with the highest valuation. It is trading at $62.90 per share, with the total market cap of around $56 billion. The market values Nike at 13.80 trailing EBITDA. In fiscal 2013, Nike has experienced good growth in both top line and bottom line. Revenue increased by 8% to $25.3 billion while the net income jumped by 12%, from $2.22 billion last year to nearly $2.5 billion this year. The diluted EPS came in at $2.69, 11% higher than the EPS of $2.42 in the fiscal 2012.

For 2014, the company estimated that it would experience a low double-digit rise in EPS, instead of the previous mid-teen growth guidance. Revenue growth is expected to come in at the upper end of its high single-digit target range. Wall Street estimated a nearly $27.2 billion in revenue and $3.01 EPS for fiscal 2014. Income investors might prefer NIKE, Inc. (NYSE:NKE) with its consistent increasing dividends. At the current trading price, Nike yields around 1.3%, with the payout ratio of 30% supporting future increases.

A potential buyout candidate might demand a premium offer

As I wrote in my previous article, Crocs, Inc. (NASDAQ:CROX) could be considered as an acquisition target. If it was taken private, it could demand the EBITDA multiple of as high as 9, a bit higher than Deckers Outdoor Corp (NASDAQ:DECK)‘s valuation. With an EBITDA multiple of 9, Crocs could get a buyout offer at $22.40 per share, a nearly 64% premium to its current trading price.

But even if a takeover does not happen, Crocs, Inc. (NASDAQ:CROX) could be a good stock for investors at its current trading price, due to its cash generating capability, strong balance sheet, low valuation, and a history of enhancing shareholders’ value via share repurchase activities.

The article Is There Upside for This Footwear Business? originally appeared on Fool.com and is written by Anh Hoang.

Anh HOANG has no position in any stocks mentioned. The Motley Fool recommends Nike. The Motley Fool owns shares of Crocs and Nike. Anh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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