Crocs Stock: Undervalued at $78, Offers 22% Owner Earnings Yield
Crocs, Inc.'s stock is trading below its estimated intrinsic value, presenting an attractive opportunity for investors. Despite recent growth and strong financials, the company faces some near-term challenges.
Crocs' stock is currently trading at around $78, significantly lower than its estimated intrinsic value of $140-$175 per share. This discrepancy offers a substantial owner earnings yield of approximately 22%. The company's robust financial performance in 2024 is evident in its operating cash flow of $992.5M and free cash flow of around $923M, achieved with minimal capital expenditure and a return on invested capital (ROIC) of about 27%.
Crocs' asset-light business model and strong brand have resulted in high gross margins of 58.8% and operating margins of 24.9%. The company generates value through its core clogs, the HEYDUDE brand, and both wholesale and direct-to-consumer (DTC) channels, with DTC accounting for 50% of 2024 revenue. The company's trailing P/E was 21.24 and forward P/E was 8.58 as of September 2025.
Management is targeting long-term operating margins of around 24%, prioritizing share repurchases and debt reduction over dividends. The company's balance sheet shows manageable net debt of approximately $1.2B, which is actively being reduced through share buybacks and selective debt paydowns. Several prominent institutional investors and hedge funds, including Boston Partners and AllianceBernstein, have recently increased their holdings in Crocs, with institutional investors owning 93.44% of the company's outstanding shares. A bullish thesis on Crocs was published by Justin on slo capital's Substack.
Despite its attractive valuation and strong financial performance, Crocs faces near-term risks such as fashion volatility, potential tariff exposure, and maintaining channel discipline as the DTC mix increases. Investors should weigh these risks against the company's compelling fundamentals and consider the potential for long-term growth.
