3 Undervalued Consumer-Cyclical Stocks with Strong Profitability

Value investors frequently discover their most promising opportunities in companies that produce strong capital returns and free cash flow, but currently face unfavorable market sentiment, often stemming from cyclical challenges, investor attitudes, or temporary execution issues. GuruFocus's exclusive metrics, including the GF Value, Profitability Rank, and Momentum Rank, can help identify such opportunities.

This article explores three stocks that exemplify this profile: Crocs Inc. (CROX, Financial), Steven Madden Ltd. (SHOO, Financial), and Columbia Sportswear Co. (COLM, Financial). Each of these stocks is undervalued compared to intrinsic value estimates, boasting high profitability scores, yet suffers from weak momentum.

Crocs Inc. CROX

Crocs Inc. currently trades well below its GuruFocus estimated intrinsic value despite maintaining exceptional financial strength and earning a Profitability Rank of 9 out of 10. The company's gross margins hover near 59%, and free cash flow margins exceed 18%, underscoring its ability to generate consistent earnings and reinvest in growth.

Croc's Lack of Market Love

Crocs, despite the quirky appearance of its original namesake clog, has been a remarkable success story. Yet, recent quarters have shown slowing revenue growth and investor concerns about fashion cyclicality. On the Q2 2025 earnings call, management acknowledged softer wholesale demand in North America. As stated by CEO Andrew Rees during the call:

We see the U.S. consumer behaving cautiously around discretionary spending. They are faced with current and implied future price increases, which we think has the potential to be a further drag on an already choiceful consumer. Against this backdrop, our retail partners are acting more carefully and reducing their open-to-buy dollars in future seasons.

On a positive note, Rees recognized a very successful sandal season and expressed optimism about growth prospects in this product line.

Analysts worry about the company's integration risks with HEYDUDE. Crocs holds a Momentum Rank of just 2 out of 10, with its stock price declining by more than 40% over the past year. The difference between fundamental value and market valuation makes Crocs an attractive investment opportunity for value investors

who seek contrarian plays.

A Case for Patient Investors

Crocs continues to generate exceptional free cash flow and has consistently engaged in stock buybacks. Its low forward P/E of 6.9 is uncommon for such for a company that has historically double-digit historical revenue growth. The brand's global expansion and collaborations with G-SHOCK as well as other lifestyle brands suggest it retains cultural relevance. For patient investors, this looks like a classic case of short-term momentum masking long-term value.

Steven Madden Ltd. SHOO

Steven Madden Ltd. is currently trading at a modest discount to its GF Value estimate. The company enjoys a strong Profitability Rank of 8 out of 10, bolstered by its consistent ability to achieve double-digit operating margins.

Steven Madden's Unloved Status

The business sector of Steven Madden faces identical market challenges to Crocs because of declining wholesale sales and consumer hesitation. The stock price of SHOO has dropped 42% during the past year which led to a Momentum Rank of 4 out o 10. This combination of solid fundamentals and depressed price action may warrant a closer look from value-oriented investors. On its latest earnings call, management highlighted inventory normalization among retail partners, which has pressured near-term sales. Investors also worry about the company's reliance on fashion trends, which can be fickle.

Chairman and CEO Ed Rosenfeld acknowledged that Steve Madden had recently been plagued by the impact of import tariffs which had affected its relationship with Chinese suppliers. The company has also experienced shipment delays that have impacted sales and delayed deliveries.

The Long-Term Lens

In contrast to Crocs, Steven Madden has maintained a tight balance sheet with minimal debt and strong cash reserves. Its diversified portfoliospanning footwear, handbags, and accessoriesprovides resilience. The company has also been expanding its direct-to-consumer channels, which carry higher margins. With a shareholder-friendly capital allocation policy, which features steady buybacks and consistent dividends, SHOO offers a defensive value play in consumer discretionary.

Columbia Sportswear Co. COLM

Columbia Sportswear Co. COLM is currently trades well below its estimated GF Value . The company maintains a strong Profitability Rank of 8 out of 10, supported by robust gross margins near 50% and a return on invested capital (ROIC) exceeding 12%, underscoring its operational efficiency and disciplined capital deployment.

Columbia's Unfavorable Market Sentiment

Like other apparel companies, Columbia Sportswear has also faced inventory headwinds, cautious consumer spending, and tariff uncertainty, which led management to withdraw full-year guidance earlier in 2025. Despite strong brand equity in outdoor apparel (Columbia, Sorel, Mountain Hardwear), the company has been overlooked amid broader retail weakness. Shares have declined roughly 29% over the past year, earning COLM a Momentum Rank of just 2 out of 10.

The Contrarian Case

Columbia maintains a debt-light balance sheet exemplified by a Debt-to-Equity be forward dividend yield of over 2%, and consistent free cash flow generation. Its international growth and direct-to-consumer initiatives are gaining traction. With a forward P/E of 13 and a Price-to-GF-Value ratio of 0.6, COLM offers a compelling mix of value, quality, and resilience.

Comparisons

Metric	Crocs CROX	Steven Madden SHOO	Columbia Sportswear COLM
GF Value vs. Price	$123 vs. $77	$44 vs. $32	$85.97 vs. $51.17
Profitability Rank	9/10	8/10	8/10
Momentum Rank	2/10	4/10	2/10
Debt Profile	High leverage	Low leverage	Low leverage
Dividend Policy	Buybacks only	Dividend + Buybacks	Dividend-focused
Growth Outlook	Moderate-high	Moderate	Moderate

All three companies share the same paradox: high profitability, low momentum, and undervaluation.

Of the 3, Crocs CROX has the most asymmetric upside. Despite debt and cyclicality risks, the equity shows the widest gap between intrinsic value estimates and current market pricing. For value-oriented investors, this contrast highlights how sentiment and fundamentals can diverge within the consumer-cyclical sector, offering a useful case study in identifying potential bargains.

Steven Madden SHOO offers a balanced, lower-risk option with steady dividends and buybacks.

Columbia Sportswear COLM is a conservative choice for dividend investors, with improving fundamentals and brand strength in durable outdoor apparel.

Please note that I am not a financial advisor. Prospective investors should conduct their own evaluations. This article is intended only for informative purposes and should not be construed as investment advice.