Barbarian At The Gate: Crocs (CROX)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Crocs ( CROX) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Crocs as such a stock due to the following factors:

  • CROX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $26.3 million.
  • CROX has traded 242,209 shares today.
  • CROX traded in a range 399.2% of the normal price range with a price range of $1.47.
  • CROX traded above its daily resistance level (quality: 78 days, meaning that the stock is crossing a resistance level set by the last 78 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on CROX:

Crocs, Inc., together with its subsidiaries, engages in the design, manufacture, marketing, and distribution of footwear, apparel, and accessories for men, women, and children in the Americas, Europe, and Asia. CROX has a PE ratio of 13.0. Currently there is 1 analyst that rates Crocs a buy, 1 analyst rates it a sell, and 6 rate it a hold.

The average volume for Crocs has been 1.3 million shares per day over the past 30 days. Crocs has a market cap of $1.1 billion and is part of the consumer goods sector and consumer non-durables industry. Shares are down 11.5% year to date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Crocs as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:
  • CROX's debt-to-equity ratio is very low at 0.02 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, CROX has a quick ratio of 2.43, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The gross profit margin for CROCS INC is rather high; currently it is at 54.03%. Regardless of CROX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 4.51% trails the industry average.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. In comparison to the other companies in the Textiles, Apparel & Luxury Goods industry and the overall market, CROCS INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Textiles, Apparel & Luxury Goods industry. The net income has significantly decreased by 71.1% when compared to the same quarter one year ago, falling from $45.08 million to $13.04 million.

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