Shoe Carnival Inc. is an American retailer of family footwear. The company operates 377 stores throughout the midwest, south, and southeast regions. It was founded by David Russell in 1978 and is headquartered in Evansville, Indiana.
The company sells men’s, women’s, children’s, and athletic footwear through its retail stores. Its stores also offer accessories such as handbags, wallets, shoe care items, and socks. The main difference in Shoe Carnival stores is its concept. The Shoe Carnival Concept is creating an urgency to buy through limited time promotions and the microphone. The mic person announces “specials” over the microphone. These specials include discount, product information, and fun specials which encourage customers to make a purchase.
Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?
Shoe Carnival Inc qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor’s only concern is the market capitalization is below the Defensive Investor’s requirement of $2 billion, but that is not enough to disqualify the company from the Defensive Investor’s requirements. The Enterprising Investor has no concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.06 in 2020 to an estimated $3.84 for 2024. This level of demonstrated earnings growth outpaces the market’s implied estimate of -1.27% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.
At the time of valuation, further research into Shoe Carnival Inc revealed the company was trading below its Graham Number of $44.65. The company pays a dividend yield of 1.59%, which is not a significantly high dividend. Its PEmg (price over earnings per share – ModernGraham) was 5.96, which was below the industry average of 33.73, which by some methods of valuation makes it one of the most undervalued stocks in its industry.
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. 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.