Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Shoe Carnival, Inc. SCVL stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Shoe Carnival has a trailing twelve months PE ratio of 14.3. This level compares pretty favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 20.4.
If we focus on the long-term trend of the stock the current level puts Shoe Carnival’s current PE among its lower zone, much below its median over the observed period (which stands at 17.3x). Hence, we could infer that the stock is undervalued in this respect, especially in light of its historical trend. Thus, the present level seems to be a suitable entry point for the stock from a PE perspective.
However, the stock’s PE compares unfavorably with its industry’s trailing twelve months PE ratio, which stands at 12.1. At the very least, this indicates that the stock is relatively overvalued right now, compared to its peers.
Nevertheless, we should also point out that Shoe Carnival has a forward PE ratio (price relative to this year’s earnings) of just 13.22 – lower than the current level. So, it is fair to say that a slightly more value-oriented path may be ahead for Shoe Carnival stock in the near term.
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Shoe Carnival has a P/S ratio of about 0.3. This is lower than the industry average, which comes in at 0.5x right now.
If anything, SCVL is in the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, Shoe Carnival currently has a Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes Shoe Carnival a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Shoe Carnival is just 1.1, a level that is lower than the industry average of 1.4. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/B ratio (used to compare a stock's market value to its book value) stands at 1.1, lower than the industry average of 1.3. Clearly, SCVL is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Shoe Carnival might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of F and a Momentum score of D. This gives SCVL a Zacks VGM score—or its overarching fundamental grade—of C. (You can read more about the Zacks Style Scores here >>).
Meanwhile, the company’s earnings estimates have been mixed at best. The current quarter has seen one estimate go higher in the past thirty days compared to none lower, while the full year estimate has seen one upward revision and no downward revisions in the same time period.
This has had a small impact on the consensus estimate though as the current quarter consensus estimate has inched up 1.6% over the past month, while the full year estimate has remained stable. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Shoe Carnival, Inc. Price and Consensus
Shoe Carnival, Inc. Price and Consensus | Shoe Carnival, Inc. Quote
Despite this somewhat mixed trend, the stock has a Zacks Rank #2 (Buy) on the back of its strong value metrics and this is why we are expecting above-average performance from the company in the near-term.
Shoe Carnival is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Boasting a good industry rank (among the Top 42% out of more than 250 industries) and a top Zacks Rank, the company deserves attention right now. So, it might pay for value investors to delve deeper into the company’s prospects, as fundamentals indicate that this stock could be a compelling pick.
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Shoe Carnival, Inc. (SCVL) : Free Stock Analysis Report
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