Shoe Carnival Inc ($SCVL) – Valuation May 2023
Company Profile (excerpt from Wikipedia):
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?
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 | Current Market Cap | $621,870,000.00 | FAIL |
| 2. Sufficiently Strong Financial Condition | Current Ratio > 2 | Current Assets | $469,720,000.00 | |
| Current Liabilities | $157,290,000.00 | |||
| Current Ratio | 2.99 | PASS | ||
| 3. Earnings Stability | Positive EPS for 10 years prior | Year | EPS | |
| 2023-01 | $3.96 | |||
| 2022-01 | $5.42 | |||
| 2021-01 | $0.56 | |||
| 2020-01 | $1.46 | |||
| 2019-01 | $1.23 | |||
| 2018-01 | $0.58 | |||
| 2017-01 | $0.64 | |||
| 2016-01 | $0.73 | |||
| 2015-01 | $0.64 | |||
| 2014-01 | $0.66 | |||
| Years Positive | 10 | PASS | ||
| 4. Dividend Record | Dividend Payments for 10 years prior | Year | Dividend | |
| 2023-01 | $0.36 | |||
| 2022-01 | $0.28 | |||
| 2021-01 | $0.18 | |||
| 2020-01 | $0.17 | |||
| 2019-01 | $0.16 | |||
| 2018-01 | $0.15 | |||
| 2017-01 | $0.14 | |||
| 2016-01 | $0.13 | |||
| 2015-01 | $0.12 | |||
| 2014-01 | $0.12 | |||
| Years With Payments | 10 | PASS | ||
| 5. Earnings Growth | Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end | |||
| Beginning Average | $0.67 | |||
| End Average | $3.31 | |||
| Growth | 392.08% | PASS | ||
| 6. Moderate PEmg Ratio | PEmg < 20 | Price | $22.89 | |
| EPSmg | $3.84 | |||
| PEmg | 5.96 | PASS | ||
| 7. Moderate Price to Assets | PB Ratio < 2.5 OR PB*PEmg < 50 | Price | $22.89 | |
| Book Value | $19.35 | |||
| PB Ratio | 1.18 | |||
| PB*PEmg | 7.05 | PASS | ||
| Total Score | 6 | |||
| Suitable for Defensive Investors? | YES | |||
| 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 | Current Assets | $469,720,000.00 | |
| Current Liabilities | $157,290,000.00 | |||
| Current Ratio | 2.99 | PASS | ||
| 2. Sufficiently Strong Financial Condition | Debt to NCA < 1.1 | Total Debt | $0.00 | |
| Current Assets | $469,720,000.00 | |||
| Current Liabilities | $157,290,000.00 | |||
| Net Current Assets | $312,430,000.00 | |||
| Debt to NCA | 0.00 | PASS | ||
| 3. Earnings Stability | Positive EPS for 5 years prior | Year | EPS | |
| 2023-01 | $3.96 | |||
| 2022-01 | $5.42 | |||
| 2021-01 | $0.56 | |||
| 2020-01 | $1.46 | |||
| 2019-01 | $1.23 | |||
| Years Positive | 5 | PASS | ||
| 4. Dividend Record | Currently Pays Dividend | Dividend | $0.36 | PASS |
| 5. Earnings Growth | EPSmg greater than 5 years ago | EPSmg – Current | $3.15 | |
| EPSmg – Prior | $0.83 | |||
| Growth | 280.57% | PASS | ||
| Total Score | 5 | |||
| Suitable? | YES | |||
Stage 2: Determination of Intrinsic Value
| MG Value Formula | ||||
| Value = EPSmg * (8.5+2g) |
| Calculating MG Value | |
| EPSmg | $3.84 |
| MG Growth Estimate | 15.00% |
| MG Value | $147.79 |
| Net Current Asset Value | $0.20 |
| MG Value based on 3% Growth | $55.66 |
| MG Value based on 0% Growth | $32.63 |
| Market Implied Growth Rate | -1.27% |
| MG Opinion | |
| Current Price | $22.89 |
| % of Intrinsic Value | 15.49% |
| Opinion | Undervalued |
| MG Grade | |
| Factor | Score |
| Investor Suitability | 2.0 |
| Good Price to Value? | 1.0 |
| Trading Below Graham Number? | 1.0 |
| Long-term Dividend Growth? | 0.0 |
| Dividend Yield Above 2%? | 0.0 |
| PEmg Below Industry Average? | 0.5 |
| Trading Below NCAV? | 0.0 |
| Total Score | 4.5 |
| MG Grade | A- |
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.
Shoe Carnival Inc fares extremely well in the ModernGraham grading system, scoring an A-.
Stage 3: Information for Further Research
| Other Useful Information | |
| Current Ratio | 2.99 |
| PB Ratio | 1.18 |
| Dividend Yield | 1.59% |
| Number of Consecutive Years of Dividend Growth | 8 |
Most Recent Balance Sheet Figures
| Balance Sheet | Date |
| Total Current Assets | $469,720,000.00 |
| Total Current Liabilities | $157,290,000.00 |
| Long Term Debt | $0.00 |
| Total Assets | $989,780,000.00 |
| Intangible Assets | $44,620,000.00 |
| Total Liabilities | $464,210,000.00 |
| Shares Outstanding (diluted) | 27,430,000.00 |
Earnings Per Share History
| Earnings | ||
| Year | EPS (diluted) | EPSmg |
| Estimated-Next FY | $4.58 | $3.84 |
| 2023-01 | $3.96 | $3.15 |
| 2022-01 | $5.42 | $2.45 |
| 2021-01 | $0.56 | $0.94 |
| 2020-01 | $1.46 | $1.06 |
| 2019-01 | $1.23 | $0.83 |
| 2018-01 | $0.58 | $0.64 |
| 2017-01 | $0.64 | $0.67 |
| 2016-01 | $0.73 | $0.68 |
| 2015-01 | $0.64 | $0.66 |
| 2014-01 | $0.66 | $0.66 |
| 2013-01 | $0.72 | $0.61 |
| 2012-01 | $0.66 | $0.52 |
| 2011-01 | $0.69 | $0.45 |
| 2010-01 | $0.40 | $0.34 |
| 2009-01 | $0.14 | $0.33 |
| 2008-01 | $0.32 | $0.42 |
| 2007-01 | $0.58 | $0.45 |
| 2006-01 | $0.47 | $0.38 |
| 2005-01 | $0.32 | $0.33 |
| 2004-01 | $0.31 | $0.33 |
| 2003-01 | $0.40 | $0.33 |
| 2002-01 | $0.34 | $0.29 |
| 2001-01 | $0.26 | $0.25 |
| 2000-01 | $0.29 | $0.20 |
| 1999-01 | $0.25 | $0.13 |
| 1998-01 | $0.19 | $0.07 |
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. 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.
