Line Your Portfolio With Crocs, Wolverine Shares

The U.S. economy may not be in the greatest shape but a pair of shoe companies are rocking and rolling. Monday Wolverine Worldwide (NYSE: WWW) announced an 18% profit increase and weeks ago Crocs (NYSE: CROX) launched a line of shoes with Tiger Woods' former golf coach. Should you invest in these two shoe makers?

As I wrote in July, after riding a wave of popularity a few years ago, Crocs hit the skids -- with its stock bottoming out in 2009. But since then, it has reinvented itself and is enjoying spectacular global demand growth.

Two weeks ago, Crocs announced a line of golf shoes designed by Tiger Woods' former golf coach, Hank Haney, who has coached hundreds of golfers for tournaments around the world. The new shoes for men and women will be launched next year and they're intended to be worn on and off the course. These Crocs shoes are probably destined to add to the company's revenue momentum.

But Crocs is not the only shoe company on a roll. Wolverine -- maker of casual shoes, rugged outdoor and work footwear -- boosted its sales and profit forecast and reported an 18% boost in its third-quarter profit. Thanks to growth in its outdoor, lifestyle and consumer direct businesses, Wolverine's revenues rose 13% to $362 million while its net income climbed to $34 million. Its 82 cents a share in earnings were seven cents ahead of expectations.

And Wolverine is confident about the future. It raised the lower end of its EPS forecast by six cents from a range between $2.40 and $2.50 to a higher range from $2.46 to $2.52 a share. The company also boosted its revenue expectations for 2011 to between $1.4 billion and $1.43 billion.

Does all this good shoe news mean it's time to buy these stocks? Maybe on Wolverine, yes on Crocs. Here's why:

• Wolverine: rapidly growing, profitable company; somewhat over-priced stock. Wolverine revenues were up 13% to $1.35 billion in the last year while its net income popped 69% to $118 million yielding an 8.9% profit margin. But its Price-earnings-to-growth ratio (PEG) -- 1.0 is fair value -- is a slightly over-valued 1.22 on a P/E of 13.7 on earnings forecast to grow 11.2% to $2.77 in 2012. If Wolverine sustains its recent 18% growth; however, the stock is cheap.
• Crocs: rapidly growing, highly profitable company, fairly priced stock. Crocs revenues are up 22% in the last year to $917 million and its net income exploded 259% to $105 million while it earned an impressive 11.6% net profit margin. And its PEG is reasonable 1.05 on a P/E of 20 on earnings forecast to grow 19% to $1.65 in 2012 after growing 82% in 2011.

Crocs has higher margins than Wolverine and its odds of beating growth forecasts look strong given its new products and its recent track record of beating expectations. But Wolverine could also provide upside surprise. Consider buying both -- taking advantage of Greece-driven dips to pick up the stocks at even lower prices.