We-Ge/iStock Unreleased via Getty Images Investment thesis My initial bullish thesis about Crocs ( NASDAQ: CROX ) aged extremely well as the stock rallied by 50% since January 31, substantially outperforming the broader U.S. market.
I remain bullish about Crocs' stock as the company continues breaking its historical revenue records while sustaining unparalleled profitability. The industry significantly depends on the broader economy's health and the environment becomes more favorable for CROX. My valuation analysis suggests that the stock is still notably undervalued even after a massive 66% YTD rally.
All in all, I reiterate my "Strong Buy" rating for CROX. Recent developments CROX released its latest quarterly earnings on May 7, beating consensus revenue and EPS estimates. Revenue grew by solid 6% YoY, the adjusted EPS demonstrated a solid expansion from $2.
61 to $3.02. Seeking Alpha The EPS expansion was achieved mostly due to the decreased interest expense and as a result of the number of shares outstanding decreasing by around 1.
3 million shares. CROX did not show much operating leverage in Q1, with a shallow expansion of the operating margin. On the other hand, the company's profitability metrics are already unparalleled and much higher compared to the sector median and historical averages.
That said, the deceleration of profitability expansion appears to be natural and does not look like a red flag. Seeking Alpha Strong Q1 allowed the company to sustain its solid balan.
