We believe that Crocs stock (NASDAQ: CROX) is currently better valued than Nike shares (NYSE: NKE). Nike’s current price-to-sales ratio of 4x is above CROX’s 2x levels. So does this valuation gap make sense? We don’t think so, especially if you look at the fundamentals. Specifically, we come to our conclusion by looking at the historical revenue and operating profit trends of these companies. Our Dashboard Better bet than NKE: pay less to get more CROX has more details – parts of which are summarized below.
1. Revenue Growth
Nike’s revenue has grown at an average rate of 7% over the past three years compared to Crocs’ revenue growth of 31%. And, if we look at revenue growth over the last twelve months, CROX’s 67% revenue growth is almost three times the 21% revenue growth of NKE.
- Crocs is involved in the design, manufacture and marketing of footwear for men, women and children under the Crocs brand. The company’s revenue increased 43% year-over-year (year-over-year) to $587 million in the fourth quarter of 2021. Its direct-to-consumer sales increased 45% year-over-year and revenue wholesale increased by 40%. In fact, the retailer’s gross margin increased 770 basis points from a year ago to 63.7%, and the adjusted operating margin was 28.6% from 21.1% a year ago. a year. Overall, Crocs’ broader results showed a 7 percentage point increase in gross profit margin to 62% of sales.
- Nike’s business includes design, develop and market footwear, apparel, equipment and accessories. The company reported revenue of $11.4 billion, up slightly year-over-year (year-on-year), and EPS of 83 cents, up 6% year-on-year. Nike’s revenue was impacted by continued supply chain challenges in the marketplace. In fact, Nike’s inventory levels at the end of the quarter were $6.5 billion, up just 7% year-on-year. These low inventory levels led to lower revenues in Greater China (-20% YoY) and Asia-Pacific and Latin America (-8%), while in North America (+12%) and in Europe, the Middle East and Africa (+6%). %) generated growth during the quarter. It should be noted that the company saw its margin increase by 280 basis points to 46% currently, thanks to margin expansion in the NIKE Direct business.
2. Growth in operating profit
Crocs’ operating income growth also compares favorably to that of NKE over the past twelve months and three years. Better revenue growth for the former led to an increase in operating income.
The fillet of everything
Crocs has experienced greater revenue and operating profit growth than Nike over the past twelve months and three years. Still, it has a comparatively lower price-to-sales ratio than NKE. This underperformance of Nike’s revenue growth and operating profit relative to Crocs reinforces our conclusion that NKE stock is expensive relative to CROX. We believe this valuation gap will eventually narrow over time to favor the cheaper stock.
It’s also helpful to see how Nike’s peers compare. NKE Peers shows how Nike compares to its peers on important metrics. You will find other useful comparisons for companies in all sectors on Peer comparisons.
What if you were looking for a more balanced portfolio instead? here is a quality portfolio which has consistently beaten the market since late 2016.
|S&P 500 return||-4%||-12%||88%|
|Performance of the Trefis MS portfolio||-4%||-14%||238%|
 Monthly and cumulative total as of 03/14/2022
 Cumulative total returns since the end of 2016