CROX: Storytelling With Data
Business
Context
In 2002, George Boedecker Jr. and Lyndon Hanson wanted to
create a safe, waterproof, and convenient boating shoe. Boedecker and Hanson
partnered with the Foam Creations company to create a lightweight, waterproof
shoe from a proprietary Croslite foam (Crocs, 2005). Boedecker and Hanson
designed the Croc to be lightweight (only six ounces), breathable, supportive,
comfortable with grip-focused soles, and waterproof. Crocs are like sandals and
clogs, unlike any shoe available on the market upon its release (Crocs, 2005).
Crocs perform well on land and sea, like crocodiles, which is why the animal is
the shoe’s logo and namesake (Croc Australia, 2024). Boedecker and Hanson introduced
the new shoe at a Florida boat show and quickly gained regional popularity
(Crocs, 2005). In 2024, Crocs is one of the top ten global leaders in the
non-athletic footwear industry (Crocs, 2021).
Crocs, Inc. is a publicly traded company (NYSE: CROX)
headquartered in Colorado with around 6,000 employees. Crocs, Inc.’s mission is
to “bring profound comfort, fun, and innovation to the world’s feet” (Crocs
Australia, 2024, para. 3). The company’s competitive advantage is its product
differentiation offering over “120 styles for men, women, and children...for
any occasion and every season”(Crocs Australia, 2024, para. 1). Crocs sells
approximately 150 million pairs of shoes annually, earning four billion in revenue
in 2023 (Crocs, 2024, May). In 2022, Crocs, Inc.
acquired HEYDUDE to help further its global expansion (Crocs, 2021). The
company’s brands are sold in over 85 countries and distributed through
wholesale and business-to-consumer channels (Crocs, 2024, May). As of September
30th, 2023, Crocs reported revenue growth in Asia at 37%, America at 7%, and Europe, the Middle East,
Africa, and Latin America (EMEALA) at 17% (Crocs Inc, 2024a).
Crocs, Inc. has a high debt-to-equity
ratio of 92.5 due to its total debt of $1.5 billion and shareholder equity of
$1.78 billion (Simply et al., 2024). However, the company repaid $277
million of its debt in the fourth quarter of 2023 (Crocs, Inc., 2024,
February). The stock
price is trading significantly lower than expected at $121.05, which is 63.7%
lower than analysts’ estimated value. Analysts agree that this stock price will
increase an average of 31% as the spread range is less than 15% for their projections
(Simply et al., 2024). Crocs, Inc. expects continued revenue growth in 2024 of
3% to 5% overall, Crocs Brand 4% to 6%, and HEYDUDE to maintain or have only a
slight increase (Crocs, Inc., 2024, February).
Industry and Competition
The non-athletic footwear market is worth 305 billion, comprised of 142 billion for dress and fashion shoes, 125 billion for casual shoes, 30 billion for sandals, and eight billion for clogs and Crocs, Inc. has the potential for substantial growth in a portion of that market ($160 billion) (Crocs Inc, 2024 January). Sketchers (NYSE: SKX), Deckers (NYSE: DECK), and Steve Madden (NYSE: SHOO) are Crocs Inc.’s competitors within the industry.
Table 1
Comparison of Financials for Crocs, Inc., Skechers, Deckers, and Steve
Madden
|
Company |
Revenue USD |
Market Cap USD |
Debt-to-Equity Ratio |
Value USD |
Est. Value USD |
Undervalue % |
Price-to-Earnings Ratio |
Earnings Growth % |
Return on Equity % (in 3
years) |
|
CROX |
4b |
7.3b |
92.5 |
121.05 |
333.7 |
63.7 |
9.3x |
5.3 |
30.9 |
|
SKX |
8b |
9.1b |
7.3 |
59.46 |
98.01 |
39.3 |
15.8x |
14.7 |
15.4 |
|
DECK |
4b |
22.0b |
0 |
850.48 |
726.21 |
17.1 |
27.2x |
9.3 |
31.8 |
|
SHOO |
2b |
3.0b |
0 |
41.59 |
141.07 |
70.5 |
17.2x |
15.3 |
23.7 |
|
Industry |
|
|
|
|
|
|
16.0x |
14.9 |
12.9 |
*Overvalued
Note: Data pulled from Simply Wall St. https://simplywall.st/markets/us
Reported revenue for 2023 was: Sketchers eight billion,
Deckers Outdoors four billion, Crocs four billion, and Steve Madden two billion
(Simply et al., 2024). Market capital is calculated by multiplying the
outstanding shares by the price per share. Investors can use market capital to
gauge public interest and company strength. Small-cap companies are between 250
million and two billion, mid-cap companies are between two and ten billion, and
large-cap companies are over ten billion (Fidelity, 2024). As Figure 1 indicates,
Crocs Inc., Skechers, and Steve Madden are mid-cap companies, while Deckers is
the only large-cap company with a market cap of 22 billion.
Crocs has the most significant debt-to-equity ratio at
92.5, following Skechers with 7.3 and Steve Madden and Deckers with zero debt. All
the companies’ stocks are undervalued per analysts, except Deckers, which is
overvalued by 17.1%. The industry price-to-equity ratios are CROX 9.3x, SKX
15.8x, DECK 27.2x, and SHOO 17.2x. CROX is a good value compared to the luxury
industry; however, based on the earnings growth, some competitors' stock may
earn more, such as SKX, with almost three times the growth at 14.7. SKX passed all
the risk checks for the risk analysis. The share price has been stable over the
past three months; debt is low and not considered a risk; debt -the debt-to-equity
ratio is 7.3%. However, the ratio has increased from 4.9% to 7.3% over the last
five years (Simply et al., 2024). DECK has had significant insider selling over
the past three months; they are debt-free, and Deck’s earnings (9.3% per year)
are forecast to grow slower than the market (14.9). SHOO risks are unstable
dividend track record and significant insider selling over the past three
months (Simply et al., 2024). Return on equity (ROE) indicates a company’s
profitability, efficiency, and how well a company manages the capital that
shareholders have invested in (Furhmann, 2024). All the companies are projected
to have higher ROEs after three years than the 12.9 expected for the industry.
Graphical Representations of Data
Figure 2
Scatterplot of the Highest
Stock Prices (July 2019 to July 2024)
Scatterplot of the Highest Stock Prices
(Without Outliers) (July 2019 to July 2024)
Note: Data pulled from Yahoo Finance.
https://finance.yahoo.com/quote/CROX/
Figure 2 is a scatterplot graph showing the
relationship between the highest stock prices by date for data compiled from
7/30/2019 to 7/30/2024. The independent variable, Date (MM/DD/YYYY), is plotted
along the x-axis in correlation to the dependent variable on the y-axis, Stock
Prices in U.S. Dollars. The stock price was the lowest on 3/19/2020 at $12.27
and the highest on 11/15/2021 at $183.88. The correlation coefficient r is used
to measure the strength of the relationship between the date and price. The
correlation coefficient can range from -1 to 1, with -1 representing a
perfectly inverse correlation and +1 indicating a perfectly positive
correlation. An r of zero would indicate no correlation (Lind et al.,
2022). Using the CORREL function in Excel, the correlation coefficient for this
scatterplot is 0.70, indicating a moderately positive linear correlation.
Without the outliers, the correlation only increased slightly to 0.73, and the
removal from the scatterplot only minimally altered the shape of the graph, as
seen in Figure 3.
Since 2019, prices have continued to rise,
peaking on November 15th, 2021, steadily declining to $48.88 in June
of 2022, then peaking again in March of 2023, declining slowly again to
approximately $80 in November of 2023, and then rising to another peak of
$165.32 on June 20th, 2024. Analysts and Croc, Inc. deemed the
shoe’s popularity due to the pandemic (Holman, 2023). It is important to note
that the data contained 20 outliers, all found in the months of November 2021
and December 1, 2021, including the highest peak price. Analysts also projected
the pricing to return to its regular, lower pricing after the pandemic (Holman,
2023). While the highest stock price has not exceeded $170 since November of
2021, the data shows a moderate correlation between the price increases over
time. However, there has not been a steady incline; the outliers, peaks, and
valleys indicate that this stock is moderately volatile.
Figure 4
Scatterplot of the Lowest Stock Prices (July 2019 to July 2024)
Note: Data pulled from Yahoo Finance.
https://finance.yahoo.com/quote/CROX/
Figure 4: The Scatterplot of the Lowest Stock
Prices chart was created in Excel with data compiled from Yahoo Finance from 7/30/2023
to 7/30/2024. Like the previous scatterplots, the graph shows the relationship
between the lowest stock prices by date and contains three prominent peaks and three
valleys. The lowest price was $8.40 on 3/18/2020, and the highest was on 11/12/2021
at $177.67. Like Figure 2, the first prominent peak occurs in November 2021,
dips in July 2022, peaks in April 2023,
declines in November 2023, and peaks in June 2024. Using the CORREL function in
Excel, the correlation coefficient for this scatterplot is also .70, or 0.73,
with the outliers removed, indicating a moderately positive linear correlation.
However, like the previous scatterplot graphs, the data indicate price
volatility.
Figure 5
Histogram of Adjusted Closing Stock Prices (July 2019 to July 2024)
Note: Data pulled from Yahoo Finance.
https://finance.yahoo.com/quote/CROX/
A histogram is a graphical representation of
a variable's frequency of occurrence or probability distribution (Capella,
2024). A histogram can indicate relationships, patterns, and distributions of
values, such as skews that can indicate volatility. The Ranges of Adjusted
Closing Stock Prices are in bins ranging from 0 to 190 on the x-axis, and the
Number of Occurrences is marked on the y-axis. Figure 5: The Histogram of the Adjusted
Stock Prices is moderately symmetrical, with prices primarily spread from 20 to
180 with clusters around 40, 80, 110, and 130. The mean is 85.86 (Table 7), and
the median is 84.27 (Table 7), which suggests a slight positive skew to the
right. The numerous rises and dips in the data indicate volatility.
Figure 6
Histogram of Stock Trade Volume (July 2019 to July 2024)
Note: Data pulled from Yahoo Finance.
https://finance.yahoo.com/quote/CROX/
The x-axis for Figure 6 is the ranges of the
stock trade volume, and the y-axis is the number of occurrences. The histogram
was created in Excel following the same steps using the stock trade volume data
from July 30, 2019, to July 30, 2024. The
histogram shows a positive skew, with 85% of the data falling between one and two
billion. Forty-one percent (513) occur at 1.5 billion of the trade volume. The
mean is $1,509,533.34 (Table 8), and the median is $1,285,300.00 (Table 8),
further highlighting the skew to the right and indicating unequal distribution.
The standard deviation is 1033434.268, suggesting the data has a significant
variance and spread. Two deviations from the mean are 3576401.872, so the 36
data points four billion and more significant are outliers, which further
support that the trade volume is an unequal distribution.
Descriptive Analytics
Mean, median, and mode can help determine a
data set's central tendency. Standard deviation can help explain a data set's
characteristics, such as variation and dispersion from the mean. Mean is the
average value of a data set. The median is the center of a data set. Mode is
the value that occurs the most often within a data set, and standard deviation measures
the dispersion of the values from the mean (Capella, 2024). Excel formulas were
used to calculate all four values for the adjusted closing stock price and
volume from July 30, 2019, to July 30, 2024.
Table 7
Mean, Median, Mode, and Standard Deviation of the Adjusted Daily Closing
Stock Price
|
Adjusted Closing Stock |
|
|
mean |
85.8591739 |
|
median |
84.269997 |
|
mode |
36.66 |
|
Std dev |
40.5816444 |
Note: Data pulled from Yahoo Finance.
https://finance.yahoo.com/quote/CROX/
The mean for the Adjusted Closing Stock is $85.86, which is the average
adjusted daily stock price for the last five years. The average is
approximately 30% lower than the current stock value of $121.05. The median is
84.27, close to the mean, indicating only a slight skew to the right but an
overall equal dispersion and no outliers. The standard deviation is 40.58
(Table 7), indicating that the data spread is extensive, with 95% of the data
falling within $4.7 and $167.02.
Table 8
Mean, Median, Mode, and Standard Deviation of the Stock Volume
|
Stock |
Volume |
|
mean |
1509533.335 |
|
median |
1285300 |
|
mode |
783000 |
|
std dev |
1033434.268 |
Note: Data pulled from Yahoo Finance.
https://finance.yahoo.com/quote/CROX/
The mean daily traded stock volume from July 30, 2019, to July 30, 2024,
is 1509533.34, and the median is 1285300, indicating that the data is skewed to
the right and multiple outliers exist. If
the data followed a standard bell curve, the mean would suggest a high average of
stock volume sold daily. However, the standard deviation also indicates that
the spread is significant, and the presence of outliers indicates that this
data is not equally distributed.
Summary
The Scatterplot of the Highest Stock Prices
(Figure 2) and Scatterplot of the Lowest
Stock Prices (Figure 4) indicate a moderately positive linear relationship
wherein the highest and lowest values for the stock prices have gradually
increased over the year. The correlation is only moderate at 0.70 because the
graph contains significant peaks and declines several times surrounding the
trendlines. High volatility is often associated with significant peaks and dips
where the prices change dramatically over a short period (Hayes, 2024).
The Histogram of the Adjusted Stock Price is almost
symmetrical, with a mean of 85.86 (Table 7) and a median of 84.27 (Table 7). The
standard deviation for the adjusted price is 40.58 (Table 7), indicating that
the data is dispersed widely. The histogram also suggests volatility due to the
various peaks and dips. The standard deviation for the volume is 965,426. Because
of the large spread and tendency to rise and fall, these are potential
indicators of a high-risk stock.
High volatility is often associated with significant peaks and dips where the prices change dramatically over a short period. Low volatility means less fluctuation and, therefore, a less risky stock. Higher volatility means the price is more likely to fluctuate dramatically over a short period, thus making it a riskier option (Hayes, 2024). Volatility = σ√T where σ is the standard deviation of returns and T is the number of periods in the time horizon (253) (Hayes, 2024). Because the standard deviations for the adjusted stock prices and the stock volume are significant, these charts also indicate high volatility. In addition to the data, Crocs, Inc. has a significantly larger debt-to-equity ratio, 92.5, compared to its competitors (Table 1). CROX's annual earnings ratio of 9.3x is good, but when the earnings growth of 5.3% is also factored in, this rate is not as good as its competitors, with growth rates ranging from 9.3% to 15.3% (Table 1). Another risk factor that analysts consider is insider selling, and Crocs, Inc. CEO Andrew Rees just recently sold 10k shares on June 17th for $160 million (Simply et al., 2024). Looking at the data's story and considering all the factors, one can see that CROX is a strong company with large capital that has overperformed by industry standards and has expected future growth, but it also has multiple associated risks.
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