QS Research · Michael Burry's Scion Capital analyst template · 2006
Crocs, Inc. (CROX)
As of 2026-11-08 · 12/15 boxes filled from SEC filings and market data
Conclusion: LONG
Conviction medium · base case +32% · downside -12% · upside +66%
Using TTM to Sep 30, 2026 (N10), Crocs earns $924.8M EBIT, $1.01B EBITDA, $664.4M net income to common and $754.0M FCF (N13, N15, N16, N19), yet trades at 8.0x EV/EBITDA and 10.5x P/E (N28, N31) with a 10.9% FCF yield (N32). The market is still pricing a levered, wholesale-risk asset rather than a branded cash generator; FY2025's -$81.2M net income to common was driven by $738.1M of HEYDUDE impairments, not by negative cash economics (S103, S28). I use the section 13 TTM base, not FY2025. Base case re-rates to 10.2x EV/EBITDA, the SHOO branded peer, justified by the Q3 2026 beat/raise and HEYDUDE returning to +6.1% growth (S5, S6, S13); that gives $200.6/share (+32.1%). Downside assumes 10% lower EBITDA at today's 8.0x and gives $134.3 (-11.6%); upside at 12.5x gives $251.4 (+65.5%), so the long rule is met. No cycle average is used; normalized is false.
Key numbers
- Share price: $151.86
- Market cap: $6.94B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $4.10B
- EV / EBITDA (TTM): 8.0x
- P/E (TTM): 10.5x
- Price / book: 5.16x
The 15 boxes
- ✓ 1. Long-form business notes
Crocs makes money by designing and selling casual footwear and accessories under two reportable brands, Crocs and HEYDUDE, through wholesale and DTC; in FY2025 wholesale was 47.9% and DTC 52.1% of consolidated revenue, with digital at 37.8%. Revenue rose from $1.39B in FY2020 to $4.04B in FY2025, but FY2025 operating income fell to $149.5M and net income to common was -$81.2M, against $1.02B and $950.1M in FY2024. The annual-report comparison shows a shift from an FY2020 Crocs business description with three channels (wholesale, retail, e-commerce) to an FY2025 two-segment, two-channel model with 514 company-operated stores. FY2020 net income was flattered by a $127.7M tax benefit, so operating and net results must be kept separate.
- ✓ 2. Competitive advantage
Crocs has a narrow, mostly product-level advantage: proprietary trade-secret material formulations (Croslite, LiteRide, Free Feel) and registered trademarks, not scale — the 10-K itself says rivals including NIKE, adidas, Deckers, Birkenstock, Steven Madden, Wolverine and VF have greater financial resources, broader presence and stronger brand recognition, and that some already sell 'substantially similar' products. The margin record supports real product pricing power (gross profit $749.9M on $1.39B revenue in FY2020 rising to $2.36B on $4.04B in FY2025) but not operating durability: FY2025 operating income fell to $149.5M from $1.02B and net income to common was -$81.2M, in the same year the 10-K records a Q2 FY2025 impairment triggering event on the HEYDUDE trademark and goodwill. Cash generation stayed positive every year of the six-year window (operating cash flow $710.4M in FY2025 on $51.2M capex), so the FY2025 loss is an asset-write-down/brand problem, not a cash-economics collapse. Verdict: brand-and-formulation moat in Crocs, weak/no moat at HEYDUDE, and no switching costs or network effects.
- ✓ 3. 10-Q takeaways
Q3 2026 revenues rose 4.6% to $1,042.6 million, with both brands growing. GAAP gross margin jumped to 66.2%, but the 10-Q attributes 630 bp to non-recurring IEEPA refunds; adjusted gross margin was 60.3%. GAAP operating income was $291.9 million and diluted EPS $4.52, while adjusted operating income was $232 million and adjusted EPS $3.69. Cash was $163.5 million, inventories $413 million, and the company bought back $250 million of stock while raising FY2026 guidance to about 3% revenue growth and adjusted EPS of $14.45-$14.65.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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