Relative Strength Continues In Crocs

Crocs, Inc.

is a stock that has been rather polarizing in the past. Many investors view the apparel company's ubiquitous line of footwear as a fad, and a bad one at that. Admittedly, the shoes are ugly - but they are popular too. The stock's earnings and revenue have also been very volatile, which has led to significant volatility in the company's share price. CROX traded as high as $69 in October 2007, and then collapsed to a low of $1.11 in March 2009 when it looked like the company may go under. Rather than going bankrupt, however, the Colorado based company has staged a strong rebound. At the end of July, shares hit a multi-year high of $31.33. On October 17 of this year, however, CROX lowered their Q3 guidance and the stock plunged to just above $15. Needless to say, this is a volatile name. Shares have once again been showing some relative strength and may be setting up for higher prices in the future. On Monday, CROX is up 3.44%, compared to a loss of almost 1% for the S&P 500. While earlier in the year, CROX traded at a high-flying valuation that belied its status as a momentum favorite, its valuation now looks cheap. Shares trade at a trailing P/E of 14.27, a forward P/E of 11.99 and a PEG ratio of 0.53. Whereas the market was exuberant about the outlook for CROX earlier in 2011, it is now highly skeptical. Analysts are projecting a 25% growth rate for the company in the next 5 years, which is excellent. Although this is a highly speculative estimate given CROX's volatile business and history, it does suggest that the upside in the name could be significant. Just as the market clearly overreacted to the upside earlier this year when CROX was one of the highest fliers on the NASDAQ, it may be underestimating the name in the wake of its recent disappointing third quarter results. Look for CROX shares to continue to retrace some of October's big plunge in the coming months as institutional investors get more comfortable with the name once again.