Steve Madden Ltd Valuation – Initial Coverage $SHOO

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – December 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Steve Madden Ltd (SHOO) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Steven Madden, Ltd. and its subsidiaries design, source, market and sell name brand and private label footwear for women, men and children. The Company operates through five segments: Wholesale Footwear, which consists of brands, including Steve Madden Women’s and Dolce Vita; Wholesale Accessories, which includes Betseyville and Luv Betse accessories brands; First Cost, which earns commissions for serving as a buying agent for footwear products under private labels for market merchandisers; Retail, which includes Steve Madden stores located in shopping malls and in urban street locations across the United States, Canada, Mexico and South Africa, and Licensing, which is engaged in the licensing of the Steve Madden and Madden Girl trademarks for use in connection with the manufacture and sale of outerwear and men’s leather accessories.

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.


Downloadable PDF version of this valuation:

ModernGraham Valuation of SHOO – January 2017

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $2,097,632,986 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.63 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 216.99% Pass
6. Moderate PEmg Ratio PEmg < 20 18.46 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.85 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.63 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $1.88
MG Growth Estimate 5.46%
MG Value $36.50
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $27.26
MG Value based on 0% Growth $15.98
Market Implied Growth Rate 4.98%
Current Price $34.70
% of Intrinsic Value 95.06%

Steven Madden, Ltd. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PB ratio. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.38 in 2012 to an estimated $1.88 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 4.98% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Steven Madden, Ltd. revealed the company was trading above its Graham Number of $22.88. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 18.46, which was below the industry average of 22.16, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $4.5.

Steven Madden, Ltd. receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $4.50
Graham Number $22.88
PEmg 18.46
Current Ratio 2.63
PB Ratio 2.85
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0


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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $520,255,000
Total Current Liabilities $197,771,000
Long-Term Debt $0
Total Assets $976,368,000
Intangible Assets $282,920,000
Total Liabilities $253,005,000
Shares Outstanding (Diluted Average) 59,329,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.95
Dec2015 $1.85
Dec2014 $1.76
Dec2013 $1.98
Dec2012 $1.81
Dec2011 $1.50
Dec2010 $1.19
Dec2009 $0.81
Dec2008 $0.45
Dec2007 $0.50
Dec2006 $0.62
Dec2005 $0.27
Dec2004 $0.17
Dec2003 $0.29
Dec2002 $0.29
Dec2001 $0.19
Dec2000 $0.25
Dec1999 $0.18
Dec1998 $0.10
Dec1997 $0.06
Dec1996 $0.03

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.88
Dec2015 $1.82
Dec2014 $1.76
Dec2013 $1.65
Dec2012 $1.38
Dec2011 $1.07
Dec2010 $0.81
Dec2009 $0.59
Dec2008 $0.45
Dec2007 $0.43
Dec2006 $0.37
Dec2005 $0.24
Dec2004 $0.23
Dec2003 $0.25
Dec2002 $0.23
Dec2001 $0.18
Dec2000 $0.16

Recommended Reading:

Other ModernGraham posts about the company

None. This is the first time ModernGraham has covered the company.

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The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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