The Product May Be Ugly… But The Stock Is A ‘Buy’

It’s a love/hate relationship…

Who knew something as innocuous as shoes could engender so much emotion?

I’m not kidding. When it comes to a pair of Crocs (Nasdaq: CROX), it seems people either really love these shoes or despise them.

Regardless of what your stance might be, I’ll say this… It seems that everyone who owns a pair raves about how comfortable Crocs are.

If you’re not familiar, Crocs is a manufacturer of casual footwear. Its Classic Clog is a fan favorite and is characterized by a back strap that loops around your heel and holes around the foot. They retail for about $45, and as you can see have nearly a 5-star rating by more than 8,700 happy customers.

The latest feature that has fans coming back for more? Well, you can now showcase your own unique style and creativity with the company’s Jibbitz shoe charms. These shoe charms plug into the holes on the shoe and you can add well-known characters, emojis, numbers, insects, you name it, you can likely customize a shoe charm to fit your personality.

Inside The Numbers

Hey, high fashion it ain’t. But sales of Crocs have been on a tear recently. For the three months ending September 30, 2019, the company pulled in more than $312 million in sales, which is a 19.8% increase over the same quarter a year ago. The company is on track to pull down more than $1.2 billion in sales, which would be a nice double-digit sales increase over 2018.

Moving to the cash flow statement we can see that the growth has carried over. In the last 12 months it’s generated more than $101 million in cash flow, a 78% improvement over the previous 12 months.

Perhaps more impressive is that the company is producing double-digit same store sales growth — a key metric in the retail industry. For example, in its most recent quarter same store sales growth was 15.9%. This is a key reason why the stock is hitting new highs.

CROX price chart

Action To Take

We’ll get an idea of whether these positive trends can continue when the company announces fourth-quarter results later this month. In the meantime, this stock sports one of the highest Maximum Profit scores my system has flashed in months, meaning it’s a “buy” until the trend reverses.

Bottom line, this is a worthy stock for a trade. But longer-term investors should keep a couple of risks in mind. First, this stock is well-known for its volatility – one of the primary reasons this is a trader favorite. Also, should consumer tastes change drastically, or the company’s same store sales metric begin to weaken, that will likely have a negative impact on the stock.

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