You are here

Is now the right time to buy Shoe Carnival Inc (SCVL)? – Simply Wall St News

Shoe Carnival Inc (NASDAQ:SCVL) is considered a high growth stock, but some investors are starting to doubt its last closing price of $19.52 can be still justified by the high growth potential. When questioning the value of a company’s share price, I have a few metrics I check. Let’s see how SCVL stacks up against those measures. Check out our latest analysis for Shoe Carnival

Should you get excited about SCVL’s future?

According to the analysts covering SCVL we should see a 21.1% increase in earnings over the next year. This means that earnings per share are to rise to $1.55 levels.

Shoe Carnival (NasdaqGS:SCVL) Past Future Earnings Jun 29th 17

Shoe Carnival (NasdaqGS:SCVL) Past Future Earnings Jun 29th 17

This means earnings will be higher than recent years.

In the same period we will see the revenue grow from $994 Million to $1.02 Billion in 2019 and net income is predicted to slightly grow from $21 Million to $23 Million in 2019, roughly growing 1.1x. Margins will certainbly be thin during this time as well.

What is Shoe Carnival’s value based on current earnings?

Stocks like Shoe Carnival with a Price to Earnings (P/E) ratio of 16.5x always catch the eye of investors on the hunt for a bargin. In isolation this metric can be a bit too simplistic but in comparison it tells us SCVL is undervalued relative to the current US market average of 23.6x and undervalued based on the latest annual earnings update compared to the Retailing average of 88.7x .

Shoe Carnival (NasdaqGS:SCVL) PE PEG Gauge Jun 29th 17

Shoe Carnival (NasdaqGS:SCVL) PE PEG Gauge Jun 29th 17

P/E ratio is simply a stock’s price divided by its earnings per share (EPS). It is a straightforward and popular way of assessing how much investors are willing to pay for each dollar a company earns.

Can SCVL’s share price be justified by its earnings growth?

The price-to-earnings ratio of Shoe Carnival stands at 16.5, compared to the industry average this already suggests that it could be undervalued.But to properly examine a value of a high growth stock like Shoe Carnival we must include its earnings growth in the calculation using the PEG ratio.

The PEG ratio (price/earnings to growth ratio) is a valuation metric used to assess the relative trade-off between the price of a stock, the earnings per share (EPS), and the company’s expected growth. Since P/E ratio is in general higher for a company with a higher growth rate, using just the P/E ratio would make high-growth companies appear overvalued relative to others. By dividing the P/E ratio by the earnings growth rate, the resulting ratio is considered to provide a more complete picture when comparing companies with different growth rates.

PE ratio of 16.5x and predicted 21.1% growth in earnings next year give Shoe Carnival a very low PEG ratio of 0.8x. This means that when accounting for its growth Shoe Carnival’s stock can be viewed a very good value based on fundamental analysis.

What next? If you want to look into Shoe Carnival further I recommend you take a look at our latest FREE analysis report. If you are not interested in SCVL anymore, you can use our free platform to see my list of stocks which are undervalued when taking in account their future growth potential.

Investors! Do you know the famous “Icahn’s lift”?

Noted activist shareholder, Carl Ichan has become famous (and rich) by taking positions in badly run public corporations and forcing them to make radical changes to uncover shareholders value. “Icahn lift” is a bump in a company’s stock price that often occurs after he has taken a position in it. What were his last buys? Click here to view a FREE detailed infographic analysis of Carl Icahn’s investment portfolio.


Related posts

Leave a Comment