Why Crocs (CROX) Was Upgraded

Story updated at 9:45 a.m. to reflect market changes.

NEW YORK (TheStreet) -- Crocs (CROX) was upgraded to "overweight" from "neutral" by Piper Jaffray Wednesday with a price target of $20.

Crocs gained 4.1% to $15.88 in morning trading.

The analyst firm cites improving demand in Asia as the main cause of the upgrade. Asia drives a large amount of sales for the shoe maker.

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Separately, TheStreet Ratings team rates CROCS INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate CROCS INC (CROX) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. 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 analysis by TheStreet Ratings Team goes as follows:

  • 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.
  • You can view the full analysis from the report here: CROX Ratings Report
 

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