As the first quarter of 2024 has come to a close, investors may be interested in the stocks that have had strong performances.
While the energy sector has posted the largest year-to-date return at 8.25%, the consumer cyclical space has lost around 0.42% over the same period.
Breaking it down further, the apparel and accessories manufacturing industry has had one of the worst performances within this sector, returning -1.52%.
Some stocks within this space, however, are outperforming the S&P 500, which has posted a gain of around 10%. As of March 29, the GuruFocus All-in-One Screener, a Premium feature, found several stocks with a market cap greater than $5 billion that had a higher return relative to the index for the three-month period. It also looked at stocks with price-earnings ratios below 15 and predictability ranks of at least one out of five stars.
Based on these criteria, the stock that has had the biggest return in comparison to the benchmark index so far this year is Crocs Inc. (CROX, Financial).
Business model
Founded in 2002, the Broomfield, Colorado-based company is known for its popular line of casual foam footwear that it manufactures and markets under the Crocs brand. Following the success of its main product, called “clogs,” despite them not containing wood like the traditional shoes do, it has since branched out to offer other styles, including sandals, flip flops, boots and sneakers. It also has released accessories called Jibbitz that are used to customize individual pairs of Crocs.
In 2021, Crocs acquired HeyDude, a fast-growing producer of casual footwear, for $2.50 billion. The company, which originated in Italy, is known for its comfortable, versatile and accessible shoes for consumers of all ages.
Its largest segment, which consists of its flagship brand, generated around 76% of total sales in 2023.
Earnings and financial overview
Crocs reported record fourth-quarter and full-year 2023 financial results on Feb. 15.
For the three months ended Dec. 31, the company posted $960 million in revenue, a 1.60% increase from the prior-year quarter. Net income came in at $254 million, or adjusted earnings of $2.58 per share, while Ebitda was $224 million. Although earnings and Ebitda were both down compared to a year ago, net income was higher.
For the year, Crocs recorded $3.96 billion in revenue, net income of $793 million and $1.09 billion in Ebitda. All three figures grew from 2022.
In a statement, CEO Andrew Rees noted the company “exceeded expectations across all metrics.”
“Crocs Brand grew across all regions and channels, highlighting the power of our strategy and disciplined execution. We made good progress in the fourth quarter towards returning our HEYDUDE Brand to a pull-market position resulting in improved gross margins and healthy inventory levels exiting the year," he said. "We are starting off 2024 from a position of strength and taking the opportunity to reinvest into several key strategic areas as we continue to lay the foundation for durable market share gains."
Looking forward, the company guided for first-quarter 2024 revenue growth between a loss of 1.50% and a gain of 0.50%, an adjusted operating margin of 22% and adjusted earnings per share ranging from $2.15 to $2.25.
As for the balance sheet, Crocs had $149 million in cash and cash equivalents and $1.99 billion in debt. Its cash-to-debt ratio of 0.08 warns the company is not able to pay off its debt using cash on hand. The company has also been issuing new debt over the past three years.
Further, GuruFocus has found that while the solid Altman Z-Score of 4.07 implies the company is in good standing, the Piotroski F-Score of 6 out of 9 means its operations are typical of a stable company.
While Crocs does not currently pay a dividend, it repurchased approximately 0.3 million shares during the quarter for $25 million. Its shareholder yield is 9.43%.
Guru and insider interest
On the back of its expansion, solid earnings and stock buybacks, gurus appear to be favoring Crocs.
As of the end of the fourth quarter, portfolio data shows nine gurus were invested in Crocs with a combined equity portfolio weight of 2.07%. Notable shareholders include Steven Cohen (Trades, Portfolio), Ray Dalio (Trades, Portfolio)'s Bridgewater Associates Bernard Horn (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio).
However, while five gurus either added to their holdings or entered a position during the three months ended Dec. 31, two cut back their holdings. Overall, gurus were fairly bullish on the stock throughout 2023.
Insiders of the company appeared to be more bearish on the stock over the past year. While a director added to his position in March, most of the transactions in recent months have been sells.
Valuation
Yielding an $8.87 billion market cap, shares of Crocs traded around $146.55 on Monday with a price-earnings ratio of 11.44, a price-book ratio of 6.10 and price-sales ratio of 2.26. It has gained 56.03% so far this year.
The GF Value Line suggests the stock is modestly overvalued currently based on its historical ratios, past financial performance and analysts' future earnings projections.
Additionally, the GF Score of 91 out of 100 indicates the company has high outperformance potential on the back of robust ratings for growth, profitability and momentum as well more moderate financial strength and value ranks.
Final thoughts
Despite having a good amount of debt, Crocs' fundamentals appear to be solid and its revenue is growing. As such, its stock has continued to perform well. While shares may be a bit overvalued currently, investors would be wise to watch the stock for an opportunity.
