Crocs Inc., Case Study Solution
Exhibit-2: P/E Ratio of Comparable Companies
Exhibit-3: Reasons for Decline in Share Price
Exhibit-4: Ratio Analysis
| Ratio Analysis | |||
| 2005 | 2006 | Comments | |
| Liquidity Ratios | |||
| Current Ratio | 1.2 | 2.7 | Improving |
| Quick Ratio | 0.6 | 1.7 | Improving |
| Asset Management Ratios | |||
| Inventory Turnover | 136 | Average | |
| Asset Turnover | 194 | Average | |
| Account Receivable Turnover | 99 | Good | |
| Profitability Ratios | |||
| ROE | 90% | 31% | Declining |
| Net Profit Margin | 16% | 18% | Increasing |
| Gross Profit Margin | 56% | 57% | Good |
| Solvency Ratios | |||
| Debt Ratio | 4% | 0.04% | Irrational |
| Debt to Equity Ratio | 18.1% | 0.1% | Irrational |
| Other | |||
| Dividend Payout Ratio | 1.6% | 0.1% | Unsatisfactory |
| DPS | 5.4 | 0.4 | Unsatisfactory |
| EPS | 332.8 | 863.5 | Excellent |
Exhibit-5: Trend of Ratios
Exhibit-6: DCF Valuation
| Revised DCF Valuation | |||||||
| 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | |
| Revenues | 355 | 831 | 997 | 1196 | 1376 | 1582 | 1740 |
| Cost of Sales | 154 | 342 | 429 | 514 | 605 | 712 | 783 |
| Gross Profit | 201 | 488 | 568 | 682 | 770 | 870 | 957 |
| SG&A | 105 | 251 | 309 | 383 | 454 | 522 | 574 |
| Operating Income | 95 | 238 | 259 | 299 | 316 | 348 | 383 |
| NOPAT (tax at 30%) | 29 | 71 | 78 | 90 | 95 | 104 | 115 |
| Ch NWC | -8 | 26 | 36 | 41 | 32 | ||
| Ch NPPE | 16 | 16 | 18 | 21 | 16 | ||
| Free Cash Flows | 84 | 66 | 62 | 66 | 67 | ||
| Discounting Periods | 1 | 2 | 3 | 4 | 5 | ||
| Discounted Cash Flow | 76 | 53 | 45 | 44 | 40 | ||
| Growth % | 227% | 134% | 20% | 20.00% | 15.00% | 15.00% | 10.00% |
| COGS/Sales% | 43.50% | 41.20% | 43.00% | 43.00% | 44% | 45% | 45% |
| SG&A As % of Sales | 29.70% | 30.20% | 31% | 32% | 33% | 33% | 33% |
| NWC as % of sales | 41.30% | 26.60% | 21% | 20% | 20% | 20% | 20% |
| NFAssets as % of sales | 16% | 11% | 10% | 10% | 10% | 10% | 10% |
| Depreciation as % of NFA | 13.80% | 24% | 15% | 15% | 15% | 15% | |
| NWC | 147 | 221 | 213 | 239 | 275 | 316 | 348 |
| NFA | 58 | 87 | 104 | 120 | 138 | 158 | 174 |
| Depreciation and ammortization | 8 | 21 | 16 | 18 | 21 | 24 | 0 |
| EBITDA | 103 | 259 | 275 | 317 | 337 | 372 | 383 |
| Net Income Loss | 67 | 166 | 181 | 209 | 221 | 244 | 268 |
| EPS | 1 | 2 | 2 | 2 | 3 | 3 | 3 |
| Discount Rate | 10.96% | ||||||
| Terminal Value | 1187 | ||||||
| Present Value of TV | 706 | ||||||
| PV Planning | $258.53 | ||||||
| Enterprise Value | $964.40 | ||||||
| Shares Outstanding | 85 | ||||||
| Price Per Share | $11.35 | ||||||
| P/E Multiple | 24.40 | ||||||
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