Here's Why Crocs (NASDAQ:CROX) Has Caught The Eye Of Investors

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Crocs (NASDAQ:CROX). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

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How Quickly Is Crocs Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Over the last three years, Crocs has grown EPS by 13% per year. That's a good rate of growth, if it can be sustained.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Crocs maintained stable EBIT margins over the last year, all while growing revenue 3.5% to US$4.1b. That's progress.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

Check out our latest analysis for Crocs

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Crocs' forecast profits ?

Are Crocs Insiders Aligned With All Shareholders?

Owing to the size of Crocs, we wouldn't expect insiders to hold a significant proportion of the company. But thanks to their investment in the company, it's pleasing to see that there are still incentives to align their actions with the shareholders. Notably, they have an enviable stake in the company, worth US$226m. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.

Does Crocs Deserve A Spot On Your Watchlist?

One positive for Crocs is that it is growing EPS. That's nice to see. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. We should say that we've discovered 3 warning signs for Crocs (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

Although Crocs certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of companies that not only boast of strong growth but have strong insider backing.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.