Crocs a Take Over Target?

There have been some chatter after that explosive earnings report on Crocs (CROX) regarding possible take over by either Nike or some other apparel company that are in need of growth with cash positions. Jim Cramer on Mad Money has suggested that Liz Clayborne (LIZ) should buy this company to boost company's bad product lines. http://www.thestreet.com/_tscs/funds/stoptrading/10354974.html.

But the question I have is why would Crocs even contemplate a merger or a buy out when their business is hitting on all cylinders and then some? One of the reason for this might be that despite phenomenal growth, Crocs is relatively cheap when compared to their peers such as Deckers (DECK) and Nike (NKE). The PEG is 0.95 with forward PE of 23.34 for Crocs while Deckers is PEG 1.33 and PE of 18.37. Looking at Nike it shows a PEG of 1.23 and forward PE of 16.30. The real story here is that Crocs is undervalued in relation to their rocket fuel derived growth. Crocs increased yoy quarterly revenue 236.4% and yoy quarterly earnings growth of 398.4%. That is robust. Crocs trades at least 25% discount to its peers when looking at the PEG, and that is expected to grow. The full year guidance was upped by Crocs to $2.90 to 2.93 per share. http://www.forbes.com/2007/05/04/crocs-quarterly-earnings-markets-equity-cx_mk_0504markets19.html?partner=yahootix

At these growth rates, Crocs deserves at least a 50X multiple but realistically, based on robust growth it can go as high as that. I believe that this stock will see $100 per share in relatively short order. That is probably why the company also announced a 2 for 1 stock split on 5/3/2007 which will become effective on 5/31/2007 and executed on 6/14/2007. There is strong likelihood that this stock will be at $50 to $60 range after the stock split. Based on this growth and based on stellar company executives, this stock will command a significant premium over its $2.9 billion market cap. I just can't see any company paying up that type of cash to buy this company. But if someone does, it will be much higher than the $2.9 billion.

I think the insiders in this company is doing a stellar job and I don't see any reason why this company would even consider selling this company, unless they get a significant premium. I say no deal.


Crocs
CROX
2 for 1
5/3/2007
5/31/2007
6/14/2007