Crocs Analysis

First, the projected cash flows range from $21.2 million in 2007 to $29.5 million in 2011 as shown in the data exhibit ‘DCF model.’ To generate these numbers Liedtke’s base case performance projections are used for the projected 2007 – 2011 net revenue numbers and the estimated depreciation and then his projections for Balance sheet accounts were used to determine the current net working capital and capital expenditure as in the exhibit ‘Financial statements.’ These projections were based by Liedtke under the following assumptions, women’s casual footwear would be wound down within one year and the historical corporate overhead-revenue ratio would conform to historical averages. These annual cash flows give us a PV (Cash flows) of $96.15 million over the next 5 years.

The terminal growth rate is the average growth rates from 2007 to 2011. Combining with previous cash flows of 5 years, the whole future cash flows are:

Here, in the given pro forma in Exhibit 8, the cost of salt and other in 1984 was 1836 while that in 1983 is 1956. Thus, the growth rate is (1956-1836)/1836=6.6%.

EPS Growth Rate: These values are also found in exhibit 6, leading to g = 5.55%

These changes in prices imply the power of growth rate’s assumption over stock price because “It was growth that drew attention to the brand. It was growth that propelled the stock offering. It was growth that drove the stock price to ever greater heights.” When the growth rate is expected to increase significantly, value of the firm is increased tremendously and so is its stock price. Both the enterprise value of the firm and its stock price change in the same direction with the change in growth rate estimates.

Each pair of Crocs are soft, comfortable and odour-resistant qualities that Crocs wearers want. Crocs today, even target a wider path of the market. Crocs use sub-segments for branding their products, as they offer their shoe type for women, men, children, sports, and everyone. For Crocs to further broaden their market, they advertise these segments, meaning customers will find their products to be comfortable e.g. around the house and to take on holiday. Crocs levels of service are customers doing most of the selecting and trying on of garments

• Pe = D1/(re – g) = 700 / (0.11 – 0.05) = $11,667 • price per share = $11,667 / 1,000 = $11.67 3. Same facts as (2) above, except the 5% income growth rate (and beginning of year common equity to support it) are only expected for years 2 and 3. Then growth is expected to be zero and all income is expected to be distributed to shareholders for all future years. a. Compute D1, D2, D3, and Dt for all future years. • Keeping in mind that income is $1,100 in year 1, increases by 5% in years 2 and 3, and then remains constant for all future years; and keeping in mind that beginning of year 1 common equity is $8,000, increases by 5% at the beginning of year 2 and at the beginning of year 3, but does not increase at the beginning of year 4 and remains constant from that point forward, you should be able to compute: D1 = $700, D2 = $735, and Dt = 1,212.75 for D3 and all future years. b. Use the dividend discount (i.e., free cash flow to equity investors) valuation model to estimate the company’s current stock price. Pe = 700/(1+ 0.11) + 735/(1+ 0.11)2 + [1,212.75/0.11]/(1+ 0.11)2 = $10,175.31 and the price per share of common stock = $10,175.31 / 1,000 = $10.18. 4. Same facts as (3) above, except the growth rates are 5% for years 2 and 3 and then 3% perpetually for all future years. a. Compute D1, D2, D3 and the growth in D for all future years. • Keeping in mind that income is $1,100 in year 1, increases by 5% in years 2

Liedtke projected for this business segment, an average growth rate 7,98% (2007-2001). The case indicates a growth from 2004-2005 of 13,5% per year . Therefore this can be somewhat a conservative growth projection. Since this has been solid growth, this could be increased to maintain the 13, 5% sales growth in the upcoming years

Crocs, Inc., is indeed a Colorado creator of unique clogs that became popular for the outdoor person in the late 1990s with both men, women, and children. These inexpensive shoes rely on a proprietary resin material called Croslite. This helps produce a slip-resistant and non-marking sole. The material also softens with body heat activation. This helps for molding the shoe to the foot and providing a conforming fit. Crocs was meant for guys on boats and in other outdoor activities like fishing and gardening, because the material of the shoe allows the foot to breathe. Crocs are also used by working men and women who spend much time on their feet. For example, health care and restaurant workers. Also, Crocs are widely considered

The profitability figures as derived from the data given in the case are as follows:

However, the company expects that its sales will grow 25 percent annually for the next five years. As illustrated in Table 1 the demand after 5 years will be approx.

c. Is your estimate of Lex’s cost of equity appropriate as a discount rate for Lex’s total operating cash flows? Why or why not?

The recent announcement of the take-over of it by Amer Sports Corporation probably influenced its valuation. Indeed, its P/E ration is much higher than the average for peers without ADIDAS-SALOMON AG. As a result, we prefer to use Equity Value based on P/E multiple without taking into account ADIDAS-SALOMON AG (Table 3).

PR group always control and check about sales, and advertisement. The ways to promote Crocs shoes is important because there is the main part to maintain the sales. This is why promotion control important due to maintain sales, the originality of the product is also important. Crocs always keep update with R&D team about the originality of crocs. (Berry, 2011) The company always maintain and use only original product due to maintain high quality product and not same with fake crocs. If there is any lack during pre-production, Crocs will then reject the item and not sell it is because it is stated in Crocs policy. (Crocs,

firm with a cash flow of $5 million and you believe it should be valued at a cash flow multiple of 10,