Steven Madden Ltd Valuation – May 2018 $SHOO

Company Profile (excerpt from Reuters): Steven Madden, Ltd., incorporated on November 10, 1998, and its subsidiaries design, source, market and sell name brand and private label footwear for women, men and children, and name brand and private label fashion handbags and accessories. The Company operates through five segments: Wholesale Footwear, Wholesale Accessories, Retail, First Cost and Licensing. The Company’s products are sold through its retail stores and e-commerce Websites within the United States, Canada, Mexico and South Africa, as well as department stores, specialty stores, luxury retailers, value priced retailers, national chains, merchants and catalog retailers. It provides merchandising support to its department store customers, including in-store fixtures and signage, supervision of displays and merchandising of its various product lines.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of SHOO – May 2018

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 $2,930,778,721 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.61 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 92.79% Pass
6. Moderate PEmg Ratio PEmg < 20 23.21 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.66 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 3.61 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 $2.20
MG Growth Estimate 3.83%
MG Value $35.61
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $31.96
MG Value based on 0% Growth $18.73
Market Implied Growth Rate 7.35%
Current Price $51.15
% of Intrinsic Value 143.63%

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 PEmg and PB ratios. 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 Overvalued after growing its EPSmg (normalized earnings) from $1.76 in 2014 to an estimated $2.2 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.35% 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 below the price.

At the time of valuation, further research into Steven Madden, Ltd. revealed the company was trading above its Graham Number of $28.66. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 23.21, which was below the industry average of 49.11, 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 $7.01.

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) $7.01
Graham Number $28.66
PEmg 23.21
Current Ratio 3.61
PB Ratio 3.66
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 3/1/2018
Total Current Assets $622,486,000
Total Current Liabilities $172,319,000
Long-Term Debt $0
Total Assets $1,021,933,000
Intangible Assets $298,539,000
Total Liabilities $220,347,000
Shares Outstanding (Diluted Average) 57,326,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.67
Dec2017 $2.04
Dec2016 $2.03
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

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.20
Dec2017 $1.96
Dec2016 $1.91
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

Recommended Reading:

Other ModernGraham posts about the company

15 Best Stocks for Value Investors This Week – 1/14/17
Steve Madden Ltd Valuation – Initial Coverage $SHOO

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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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