14 Pages Posted: 5 Apr 2010 Last revised: 9 Apr 2018
This case forces students to examine the drivers of value, particularly growth and margins. It is also effective at drawing attention to the relationship between terminal value assumptions and value creation—assumptions that generate a large sensitivity of terminal value to growth rate are assumptions that imply that a great deal of value can still be created from investments after the planning horizon. The narrative features an analyst who is trying to make sense of a sharp one-day decline in the price of Crocs stock. A teaching note and student and instructor spreadsheets are available.
Rev. Mar. 29, 2018
Looks like a bit of an overreaction in the marketplace.
—Crocs CEO Ron Snyder on Crocs's 36% stock price decline
It wasn't just Crocs, Inc., CEO Ron Snyder who was surprised by the sudden meltdown in the company's stock price on November 1, 2007. Analyst Stacy Yeung at Rockwood Asset Management had been a fan of the company for some time and had been the driving force behind Rockwood's notable accumulation of Crocs holdings. She had carefully followed Crocs since it first went public in February 2006. She believed from the beginning that Crocs had created a sustainable new brand, and the sixfold increase in Crocs's stock price from its initial offering to its high at the end of October had confirmed her judgment. While her faith in the Crocs brand was not necessarily shattered by the stock's precipitous one-day decline, she realized it was time to take a fresh look at her core assumptions about Crocs's future prospects and try to make sense of the market's recent valuation.
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Keywords: value, margins, growth analysis, stock assumptions
Suggested Citation: Suggested Citation
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