Crocs (NASDAQ:CROX), which makes the ultra comfortable specialty footwear, reported earnings Wednesday after hours (see conference call transcript). Many of you have heard of the shoes, and probably even own them. If you’ve owned the stock though, it has been nothing short of a dream run.

The company reported revenues of $256.3 million, up a whopping 130% from the previous year, and net income of $56.5 million, or 66 cents a share, up from $21.5 million, or 25 cents a share a year ago. On the face of it, the earnings look spectacular. Air Jordan 23s But the revenue fell 2 million short of analyst estimates, and the stock fell 20% Wednesday evening in after hours trading.

If you picked up shares thinking that was a bargain, today was a rude shock. Over 60 million shares were traded, which is 75% of the outstanding shares, and the stock ended the day, down a mind boggling 36%.

The Bear Case I took a deeper look at the numbers, and listened to the conference call. There was a hint of bad news on the call when the company said that inventory had gone up 200%, and the management quoted seasonality as one of the reasons for the shortfall in revenues.

This could be a serious issue, as we approach the winter season, since these shoes which have holes in them are ideally suited for warm weather. So a reasonable estimate would be that Crocs has to wait till sprint for most of the Air Jordan Fusion 5 inventory to clear up. In addition to that, the company did have difficulty in filling shelves at some of its retail stores, which also caused a drag.

All these are reasons for concern, but lets look ahead to the forecast. The company projected 2007 earnings to be around $1.94 to $1.98 a share, on sales of $820 million to $830 million. Taking the average, this is 2 cents short of estimates. But is that reason enough to shave the company’s market cap by 36%? I don’t believe so, and here’s why:

The Bull Case Contrary to people’s fears that the Crocs’ shoes are fad, they are just catching on now. Skeptics of these shoes are forgetting what makes the shoes inherently different: they are not worn for style or to make a fashion statement. On the contrary, many people say they look weird and ugly, yet they love them for the comfort the shoes provide. Now how many of you could say that about the shoes you wear? Comparisons with Heely’s (NASDAQ:HLYS) shoes are absolutely baseless, just for the above mentioned reason.

Also, while Heely’s had only one kind of shoe, Crocs has been constantly inventing new lines, for various activities such as fishing, sports and even golf. The company is Air Jordan 4s investing a whole lot into new patents, new materials and new styles for all ages. With an average price of $39, these shoes are very affordable, for the kind of comfort they provide.

Margins Looking at margins, Crocs’ gross margins run at about 58% to 60% of sales, and after all expenses, the operating margins are 25% to 30%. I doubt there are many young, high growth companies with those kind of margins.

International opportunity Crocs has been highly aggressive in tapping into international markets, and Europe seems to be a great entry point. Consumers there love fashion, and when they get comfort with fashion, they will warm up to Crocs.

The only reason I stayed away from Crocs Air Jordan Women Size all this time was the wild run up in stock price. Now that issue is settled, thanks to some real panic selling. The company is estimated to earn $2.69 next year, and at the current stock price, it amounts to a P/E of 17.6.

For a company that expects to increase income by 35 40% year over year, I believe that is a low multiple. And unlike many of the high flying stocks, there is no sign of a slowdown right now. I expect the company to beat Q4 estimates comfortably, and once spring sets in, you can see a frenzy for these shoes.

I bought some shares Wednesday at $60, and averaged down yesterday at $52. The stock is now trading at $47.74. It is good, in a way that Jordan Pro Strong the stock has had a pullback. From here on, expect to see more rational movements on the stock. There is no reason to sell this, until there are any tangible signs of saturation. Until then, I recommend to stay long, and stay rational.