“Crocs, Inc.” (UVA-F-1589)
1. Which of the comparable companies appears to be a good match to Crocs at the time of the case? Which would be a good match in five years? Use these multiples to provide additional estimates of the value of Crocs (in other words, calculate a value for Crocs using a current multiple, and calculate a value for Crocs using Yeung’s cash flow model but with a terminal value based on a multiple).
Using EV to EBITDA multiple:
- Current Crocs’ multiple is 27.74. Comparable companies that apprear to be good match to Crocs at the time of the case are Under Armour (32.00), Zumiez (21.27) and Deckers Outdoor (20.21).
- In 5 years, Crocs’ multiple is equal to EV (2011)/ EBITDA (2011) =7154/791=9.044248. Comparable …show more content…

As Crocs stays longer in the industry, its business will become mature. Thus its financial ratios will become approximately equal to those of the industry. The industry growth is expected to decelerate, thus Crocs’ growth will probably follow the same trend. Therefore, it is reasonable to assume that profit margin will eventually grow at a constant rate.
Alternative assumptions related to profit margin are assumptions about sales and net fixed asset. Acquisition of smaller footwear companies and expand international sales will have impacts on the assumed profit margin. Besides, the industry growth and comparable companies’ growth rate will also affect the assumption of profit margins.
Additional general questions
1. What is Crocs business model?
The main business of Crocs is manufacturing selling through retailers a large variety of comfortable and functional shoes at relatively low prices. At first, the company enjoyed high margins as a result of economies of sales and sales through company-owned stores. However, with increases in competition and expansion of the third-party distribution channels, to generate revenue they rely rather on high volume of sales, because margins are expected to become lower in future with increase of low-margin products sales. The company has operations in the U.S. and abroad. They are planning to expand on markets abroad,