Essay about Crocs: Revenue and Growth Rate

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 new product line of cleats. We must now find the operating cash flows (OCF). This step is

Given that the total profit over 8 years is $1.2375B (or $155M per year for 8 years), we will now compute the Present Value of this amount using the following formula:

The brand Crocs was founded in 2002 by Lyson Hanson, George Boedecker Jr, and Scott Seamans. This comfortable shoe is for all ages, but is mostly worn by kids. The shoe was originally supposed to be a boat shoe because of its waterproof resistance. One thing that is great about Crocs is that they are comfortable and you can wear them all season. For the winter Crocs have a fur lining on the inside to keep your feet nice and toasty! Many doctors wear Crocs while in surgery for a long time because they are easy to slip on and off. They eliminate achy pain in your feet leading to a more comfortable rest of your day. Crocs are made out of a material called Croslite. Crocs are priced at $20.00 being the lowest and $40.00 being the highest price.

A store that sells shoes through an online method, Crocs is based in US and has slippers and shoes you must be looking for and get your orders placed through an online means of purchase you are incumbent to use. The use of Crocs coupon codes is the most effective form of discounted purchases you can get through online accessibility you will need use and get prices reduced.

In Seattle, weather often determines one’s wardrobe. For those considered “fashionable”, finding footwear appropriate for Seattle’s versatile climate is difficult. There is one shoe that never ceases to amaze: crocs. Water-resistant with ventilation holes, crocs prove perfect for every disaster. Comfort and style are obvious perks, nonetheless bedazzling possibilities. Not to mention their lightweight and easy removal qualities that are necessary for quests. Remember the ruined white converse and flip flops forgotten in the muddy ocean waters? Croc’s removable adventure strap is crucial in adversity. With all colors and sizes, crocs certainly are the world’s most perfect shoe.

tment. Or, at least, some comparative position, mea- suring the merits of du Pont vs. American Telephone. For such comparative purposes, it will be useful to examine the effects on valuation of extreme rates of growth. The ana- lyst may well decide that a 10% rate of growth is a prac- tical top limit for companies of any size under present competitive conditions, stretching that a bit for I.B.M. and a few others. Of course, since we have put a finite limit on years, involving a tragic ending, logic decrees a declin- ing rate of growth and then a

The valuation process, in this case, requires us to estimate the short-run non-constant growth rate and predict future dividends. Then, we must estimate a constant long-term growth rate at which the firm is expected to grow. Generally, we assume that after a certain point of time, all firms begin to grow at a rather constant rate. Of course, the difficulty in this framework is estimating the short-term growth rate, how long the short-term growth will hold, and the long-term growth rate.

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

Second once Apple stabilized after year 2019, the prediction of growth is 3%, and Beta was projected to be .96. Again, by using the boundaries stated above: the (Ke), weight of equity/debt, and WACC were as follow 6.34%, 80%, 20%, and 5.63%. These numbers were somewhat similar to its high growth stage; therefore, signifying Apple is still a strong company once it stabilizes. Yet, another reason why Apple can provide such attractive returns. Conversely, finding the Terminal Value (Pt) of the company, which is the value of the company at a future year, projected the PV for stable growth, in this case it was 2020. The (Pt) was over $1 billion, yet again another reason why Apple creates a great investment opportunity. Moreover, by adding all of the PV, including the stable growth year, the intrinsic value of the firm is over $966 million and minus the current value of debt, Apple is still worth (value of equity) over $926 million. This equity divided the current number of shares outstanding; Apple’s intrinsic value of stock is $988.80 per share. By comparison the current stock price, which is $649.79 per share, the stock value is undervalued. Likewise, making (AAPL) a rewarding opportunity that must not be taken for granted.

In DCF valuation (Chart 2), long-term growth rate is assumed to be 4%. Change in working capital is calculated as the average of 1997 and 1996 figure and is assumed to be constant for simplicity. Terminal value is valued at $69,398.1 million and NPV is $51,525 million. Stock price will be $37.07, indicating an exchange ratio at 0.46. This is a very conservative valuation as our DCF price is lower than Amoco’s current market price.

Also, growth affects profitability. In the short run, growth above a certain rate may reduce profitability. Some of the finance required for the investment to achieve growth will come from firm’s sales revenue. A firm opting to expand in the existing market will have to spend on advertising and marketing whereas a firm looking to diversify will have to spend on market research and hiring specialists .Firms will have to sacrifice some of its short run profits for the long run gains which growth might yield (Sloman & Sutcliffe,2001). However, In the long run, a rapidly growing firm may have increasing profits by achieving economies of scale and increased market power. These profits can then be used to finance further growth. (Sloman & Wride, 2009).

Q2: Use the FCF Valuation Template below to modify the analysis in the case, Ex. 6 (incorrectly labeled Ex. 5), calculating and defending an estimate of Crocs value. Soln: The preferred method to determine a company’s going-concern value by adjusting for risk and time. Simply put, the value of equity = value of firm – value of debt. So to find the intrinsic or fair values of Crocs, the forecast numbers from exhibit 6 were plugged into the provided template and appropriate entries from the balance sheet and income statement were entered. Assumptions: The depreciation and amortization amounts, capital expenditures were pulled directly from exhibit 6 assuming them to be incremental. Other assumptions include the discount rate at 10.96%, the long-term growth at 6%, and market value of debt as zero and no redundant assets. The firm will have perpetual growth after 4 years at a rate of 6%. The free cash flows along with terminal value calculated are listed below:

Growth Usually characterized by rapid growth in sales and profits due to increase in output, economies of scale, better pricing and the public's awarness of the product through word of mouth. Companies typically invest significant promotional resources again at this stage. Prices level and then fall; price match to beat competition.

After applying frameworks and theories, it can be stated that in terms of growth in a company, I have learnt that it can be applied and indicated differently in distinctive companies. To exemplify, growth can mean increase in staff employment in a company whereas it can also mean increase in production volume. However, it is clear that growth must be planned, organised, activated and controlled (Nieman and Pretorius, 2004). In other words, growth can be either sustaining its business in the industry or expanding its business.