Retail Stocks

Shoe Carnival Inc Valuation – June 2018 $SCVL

Company Profile (excerpt from Reuters): Shoe Carnival, Inc., incorporated on April 3, 1996, is a family footwear retailer. The Company’s primary activity is the sale of footwear and related products through its retail stores in approximately 30 states within the continental United States and in Puerto Rico. It also offers online shopping on its e-commerce site at www.shoecarnival.com. The Company’s products assortment includes dress and casual shoes, sandals, boots and an assortment of athletic for the entire family in four general categories-women’s, men’s, children’s and athletics.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of SCVL – June 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 $548,825,424 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.00 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 27.01% Fail
6. Moderate PEmg Ratio PEmg < 20 22.57 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.75 Pass
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 4.00 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 Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.50
MG Growth Estimate 2.00%
MG Value $18.79
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $21.81
MG Value based on 0% Growth $12.78
Market Implied Growth Rate 7.03%
Current Price $33.94
% of Intrinsic Value 180.63%

Shoe Carnival, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings growth over the last ten years, and the poor dividend history, and the high PEmg ratio. The Enterprising Investor has no initial concerns. 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 $1.33 in 2015 to an estimated $1.5 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.03% 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 Shoe Carnival, Inc. revealed the company was trading above its Graham Number of $29.12. The company pays a dividend of $0.3 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 22.57, which was below the industry average of 37.1, 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 $13.6.

Shoe Carnival, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $13.60
Graham Number $29.12
PEmg 22.57
Current Ratio 4.00
PB Ratio 1.75
Current Dividend $0.30
Dividend Yield 0.87%
Number of Consecutive Years of Dividend Growth 3

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Most Recent Balance Sheet Figures

Balance Sheet Information 4/1/2018
Total Current Assets $347,642,000
Total Current Liabilities $86,828,000
Long-Term Debt $0
Total Assets $437,915,000
Intangible Assets $0
Total Liabilities $136,405,000
Shares Outstanding (Diluted Average) 15,528,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.99
Jan2018 $1.15
Jan2017 $1.28
Jan2016 $1.45
Jan2015 $1.27
Jan2014 $1.32
Jan2013 $1.43
Jan2012 $1.31
Jan2011 $1.37
Jan2010 $0.80
Jan2009 $0.29
Jan2008 $0.65
Jan2007 $1.15
Jan2006 $0.93
Jan2005 $0.64
Jan2004 $0.61
Jan2003 $0.81
Jan2002 $0.67
Jan2001 $0.52
Jan2000 $0.59
Jan1999 $0.51

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.50
Jan2018 $1.27
Jan2017 $1.34
Jan2016 $1.36
Jan2015 $1.33
Jan2014 $1.32
Jan2013 $1.23
Jan2012 $1.04
Jan2011 $0.89
Jan2010 $0.69
Jan2009 $0.67
Jan2008 $0.84
Jan2007 $0.90
Jan2006 $0.76
Jan2005 $0.66
Jan2004 $0.66
Jan2003 $0.66

Recommended Reading:

Other ModernGraham posts about the company

Shoe Carnival Inc Valuation – Initial Coverage $SCVL

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Disclaimer:

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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