Is Crocs Doomed For Failure
I must preface this with the fact that I believe Crocs (CROX) are a fad, and I'm personally short the stock (at an average cost of approximately $62). The shoes have many unique attributes mbt sale (easily washable resin material, incredibly comfortable). However, one must ask a few questions:
1) Do these attribute create a defensible market position?
Regarding (1), while I don't know enough vis a vis the chemical mbt shoes australia attributes of their product (and, subsequently, how easy/difficult replication would be), I have a feeling their underlying product is fairly easy to replicate.
Regarding (2), this is a very difficult (and extremely important) timberland boots on sale question to consider. CROX has annual revenue [TTM] of $590 million. Nike (NKE), on the other hand, has annual revenue of $16.8 billion. Thus, one could assume that there is ample room for potential opportunities for CROX.
Question timberland outlet online 3 contains assumptions that drive the largest components of the company's value. CROX has an enviable 28% operating margin (compared with 13% for Nike and almost 6% for the industry, according to Yahoo's finance site). Is white timberland boots this sustainable? Regardiless of revenue growth, empirical evidence tends to support a thesis that long term margins revert towards the industry/market. This may take a few (or many) years, but it will occur. This margin decay beats pas cher will seriously impact profitability.
My enterprise DCF analysis, given CROX's TTM financials (as of 6/30/07), operating under the following VERY ROSY assumptions, gave a value of roughly $55:
1) ROIC maintains in the casque beats by dre mid 30% range IN PERPETUITY
2) Revenue growth over the next 5 years of 25% per annum
3) Terminal growth (after year 5) of 10%
4) WACC (assuming no debt, essentially mirroring their existing capital structure) casque monster beats of 11.75%
I'll grant that revenue growth could be much higher, but I feel I was way too optimistic in my ROIC and terminal growth assumptions (particularly terminal growth), and still only came up with $55 as a share value.