CrocsUgly. Whimsical. Faddish. Colorful. Easy to hose off if you step in something unpleasant.

There are many ways to describe Crocs' (CROX) unique footwear. Here's another one: "hideously overpriced stock... again."

Deja P.U. all over again

Crocs clearly charmed investors with its quarterly results: Second-quarter profit increased 71.9% to $55.5 million, or $0.61 per share, and total sales increased 29.6% to $295.6 million.

Helping buoy the beastly shoes is Crocs' successful invasion overseas: Crocs sales in Asia increased 37.5%, to $121.9 million, and sales in Europe increased 50.4%, to $52.2 million. Based on all that news, the company's shares got about a 15% boost.

Crocs has certainly staged an impressive comeback since its near-death experience in 2008. But it's worth remembering how it became one of the hottest stocks around, with its growth fired up by its faddish appeal.

There was some rationale for the hoopla back then: In 2007, annual revenue growth increased 138.9%, to $847.4 million, and Crocs generated $2.00 per share in profit.

Back then, investors bid up its shares to hideously overpriced levels, too. Then came 2008 and the other shoe dropped: Crocs' annual revenue fell 14.8%, and it reported a horrific net loss of $2.24 per share.

People who bought Crocs shares in early 2007 experienced a horrifying 95% drop in share price by the end of 2008.

You paid how much for plastic shoes?!

Clearly, Crocs has been able to put a much better foot forward in the present day, putting all that fuss behind it. It's now operating profitably and growing sales at a respectable clip.

However, investors are mistakenly attaching quite a premium price to Crocs. The company's shares are trading at 21 times earnings, which sounds awfully pricy, given its faddish nature and poor history. Compare it with some of its peers:

* Skechers (SKX) is trading at just 10 times earnings.
* Deckers (DECK), which makes the Teva and Uggs brands, trades at 23 times earnings.
* Steve Madden (SHOO) has a price-to-earnings ratio of 21.
* Even mighty Nike (NKE) has a P/E ratio of 21.

Can Crocs truly deliver on hopes for continued double-digit growth in sales and earnings? I'm sure there will always be diehard Crocs fans -- probably 5-year-olds and folks who stand on their feet all day -- but I don't see a sustainable growth story here.

Meanwhile, take the nasty economic environment (which seems to be getting nastier in the second half of the year) and the regularly nasty competitive environment surrounding footwear trends and fads, and I'm not a Crocs convert.

I hope investors are taking a clue from Crocs' history and won't get bitten again.

Motley Fool analyst Alyce Lomax owns no shares of any of the companies mentioned. The Motley Fool owns shares of Skechers USA.


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Gumby

I can imagine by yourlastname that you are a hopeless shoe crazed Italain lass!

August 02 2011 at 4:22 PM Report abuse rate up rate down Reply
kitharris1

oh and i just noticed that doctors wear them in the o.r. the reason is simple, they don't hurt their feet. these guys aren't stupid and could buy anything they wanted. however, i do see some wear new balance shoes too.

August 02 2011 at 1:59 PM Report abuse rate up rate down Reply
kitharris1

if you don't own a pair of crocs, you owe it to yourself to buy an inexpensive pair. i have a pair of just regular crocs i bought for $9.99 and they are the most comfortable shoe i have ever worn. took me about 6 years since they were out to buy a pair. now they are all i wear around the house. my feet hurt with regular shoes because i'm 65 years old. i don't have to tie them, just slip them on and it's all good. i bought a second pair for $19.99, worth every penny.

August 02 2011 at 1:57 PM Report abuse rate up rate down Reply
larry & gail

lost your ass again HUH?

August 02 2011 at 1:56 PM Report abuse rate up rate down Reply
Dick or Darlene

Give it break Alyce. Your message never changes re Crox. One of these days maybe you will be right.

August 02 2011 at 1:44 PM Report abuse rate up rate down Reply
urkiddinmee

I've never understood nurses or doctors who wear these things into the OR, and more especially the ER. Stuff gets on your shoes in there that Lysol might not sterilize. jst sayin'

August 02 2011 at 12:00 PM Report abuse rate up rate down Reply
Gumby

Alyce, you are still at it even I dont need to punch in my password to post comment here.. as if you are expecting me... How sweet of you?

August 02 2011 at 11:18 AM Report abuse rate up rate down Reply
Gumby

You call them ugly, but they dont smell or stink at all... If your feet stinks, you need Crocs!!
it can be a jingle !

August 02 2011 at 11:17 AM Report abuse rate up rate down Reply
darkshark0910

yur a big dummy, check out its margin, best in the buisness- and its p/e right along side with its peers. Keep on shorting it, every time it rallys i count on people like u to feul it.

August 02 2011 at 8:56 AM Report abuse rate up rate down Reply