An investment in Crocs (CROX 18.33%) is starting to feel like a pair of its signature shoes: There may still be holes in the business model, but comfort is winning over polarizing fashion aesthetics. Shares of the resin-footwear maker jumped at the open on Thursday after the company posted better-than-expected results.

The numbers may not seem great at first glance. Consolidated revenue rose a mere 3% -- or 4% on a currency-adjusted basis -- for the holiday quarter. Adjusted net income took a 2% step back. However, earlier guidance and analyst expectations were far worse. Wall Street pros were bracing for a 12% slide in adjusted earnings on flat top-line results.

It's not exactly victory-lap material, but it's a sound beat on both ends of the income statement. Crocs' outlook for the year ahead is also promising for a rare shoe stock trading at a single-digit earnings multiple.

Let's walk and talk.

Made to move

Crocs can be volatile during earnings season. The shares tumbled 19% in its previous financial update. The company may have delivered another bottom-line beat in October's third quarter, but its forecast was problematic. However, Crocs was able to nail the look back and look ahead this time around.

Here's a fun stat about Crocs. Before the shares opened more than 20% higher on Thursday morning, the stock was down 19% over the past year. This matches the stock's single-day drop after its last report -- but that's not the fun stat I'm referring to.

Crocs has now posted double-digit percentage earnings beats in each of the last four quarters. It wasn't enough to move the stock higher in an otherwise buoyant market over the past 365 days.

That's not fair. Adjusted earnings for all of 2024 wound up rising 9% to $13.17 a share, but as of Wednesday's close, the stock was trading for just 6.8 times last year's adjusted profit. Even after Thursday's initial heave skyward, Crocs is still trading at a single-digit price-to-earnings ratio (P/E).

There are plenty of reasons why a consumer-facing company with a well-known brand would be trading at such a low multiple, but Crocs doesn't check many of those boxes. It did have to upend its once cash-heavy balance sheet to finance the $2.5 billion acquisition of Heydude three years ago, but it's closing out 2024 with less than $1.4 billion in borrowings after paying back another $323 million of debt. Its debt-to-EBITDA (earnings before interest, taxes, depreciation and amortization) multiple is a reasonable 1.4, lower than what larger footwear makers Nike and Skechers are sporting.

Despite the off year, it snapped a streak of five consecutive years of double-digit revenue growth for Crocs. Do you know how many times Nike has delivered a double-digit top-line increase in that time? Once.

Nike has also posted year-over-year declines in revenue in each of the past three quarters, but the market feels that it deserves a P/E that's three times higher than Crocs'. I don't mean to rain on the iconic Nike to make the point that Crocs was cheap heading into this week's blowout performance, but analysts don't seem to give the latter a break.

Image source: Crocs.

Proving the market wrong

Wall Street isn't always fair to Crocs. Earlier this week, Baird became the latest firm to slash its ceiling on the stock, lowering its price target from $180 to $150. In Baird's defense, even the new price goal is substantially higher than where Crocs is standing even after Thursday's pop. Baird is a bull, but the same can't be said about some of its peers.

Two other firms have lowered their price targets on Crocs this young year. A fourth firm -- Williams Trading -- downgraded the shares last month. Williams Trading pointed to proprietary channel checks showing that trends were weakening at Crocs. Its namesake line was going to be flat in 2025, and the problematic Heydude business was going to continue to crank out negative growth.

Reality is proving to be kinder. Revenue rose 4% in the fourth quarter for the Crocs brand. Heydude clocked in flat, and that was a welcome surprise. Strength in direct-to-consumer and international sales helped offset weakness at the wholesale level that many Wall Street worrywarts may have been focusing on in their projections.

The new year isn't expected to deliver a victory lap right away. Crocs is bracing investors to expect 2% to 2.5% growth in 2025, partly held back by a negative impact on foreign currency. The midpoint of its $12.70 to $13.15 per share in adjusted earnings forecast translates to a 2% dip in the coming year.

However, a year ago at this time, Crocs was only modeling per-share adjusted profitability of just $12.05 to $12.50. It found ways to deliver operating improvements. It also didn't hurt that, beyond nibbling away at its debt, Crocs keeps using a chunk of its generous cash flow to buy back its stock to improve its per-share earnings.

Let the boo birds keep looking down on Crocs, seeing the holes in the footwear as a flaw. It's more than that. It's a way out for one of the cheapest shoe stocks on the market.