All You Need To Know About Steven Madden, Ltd.'s (NASDAQ:SHOO) Financial Health
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Small-caps and large-caps are wildly popular among investors; however, mid-cap stocks, such as Steven Madden, Ltd. (NASDAQ:SHOO) with a market-capitalization of US$2.8b, rarely draw their attention. While they are less talked about as an investment category, mid-cap risk-adjusted returns have generally been better than more commonly focused stocks that fall into the small- or large-cap categories. This article will examine SHOO’s financial liquidity and debt levels to get an idea of whether the company can deal with cyclical downturns and maintain funds to accommodate strategic spending for future growth. Note that this commentary is very high-level and solely focused on financial health, so I suggest you dig deeper yourself into SHOO here.
Check out our latest analysis for Steven Madden
Is SHOO’s debt level acceptable?
A debt-to-equity ratio threshold varies depending on what industry the company operates, since some requires more debt financing than others. As a rule of thumb, a financially healthy mid-cap should have a ratio less than 40%. For SHOO, the debt-to-equity ratio is zero, meaning that the company has no debt. It has been operating its business with zero debt and utilising only its equity capital. Investors' risk associated with debt is virtually non-existent with SHOO, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Can SHOO meet its short-term obligations with the cash in hand?
Given zero long-term debt on its balance sheet, Steven Madden has no solvency issues, which is used to describe the company’s ability to meet its long-term obligations. But another important aspect of financial health is liquidity: the company’s ability to meet short-term obligations, including payments to suppliers and employees. At the current liabilities level of US$204m, it seems that the business has been able to meet these obligations given the level of current assets of US$661m, with a current ratio of 3.24x. The current ratio is the number you get when you divide current assets by current liabilities. However, many consider a ratio above 3x to be high, although this is not necessarily a bad thing.
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SHOO has zero-debt as well as ample cash to cover its near-term liabilities. Its safe operations reduces risk for the company and its investors, though, some degree of debt could also boost earnings growth and operational efficiency. I admit this is a fairly basic analysis for SHOO's financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Steven Madden to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for SHOO’s future growth? Take a look at our free research report of analyst consensus for SHOO’s outlook.
Valuation: What is SHOO worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether SHOO is currently mispriced by the market.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
