Shoe Carnival, Inc. (SCVL - Get Rating) in Evansville, Ind., operates as a family footwear retailer in the United States. Its shares are currently trading 33.5% below their 52-week high of $46.21, which they hit on Nov. 18, 2021. However, SCVL reported impressive fiscal second-quarter results, beating the Street’s estimates for sales and adjusted EPS by 12.5% and 88.6%, respectively. 

The stock has gained 7.5% in price over the past year to close yesterday’s trading session at $30.75.

The company’s board of directors recently approved a 29% increase in SCVL’s quarterly dividend to $0.09 per share. In addition, the company has $50 million available in calendar 2022 for repurchasing shares under its share repurchase program. Furthermore, the company aims to add 10 plus stores in its fiscal 2022, more than 20 new stores in fiscal 2023, and more than 25 new stores annually by fiscal 2024. So, the stock’s near-term prospects look bright.

Here is what I think could influence SCVL’s performance in the upcoming months:

Robust Financials

SCVL’s net sales increased 23.4% year-over-year to $313.37 million in the fourth quarter, ended Jan. 29, 2022. Its gross profit grew 49.5% year-over-year to $116.82 million, while its adjusted net income came in at $23.83 million, representing a 220.1% year-over-year increase. Also, its adjusted EPS came in at $0.83, up 219.2% year-over-year.

Favorable Analyst Estimates

For its fiscal year 2024, analysts expect SCVL’s EPS and revenue to grow 13.4% and 7.7%, respectively, year-over-year to $4.65 and $1.53 billion. In addition, its EPS is expected to grow at 10% per annum over the next five years. Furthermore, Wall Street analysts expect the stock to hit $50 in the near term, indicating a potential 62.6% upside.

High Profitability

In terms of trailing-12-month net income margin, SCVL’s 11.64% is 76.1% higher than the 6.61% industry average. Likewise, its 1.83% trailing-12-month asset turnover ratio is 73.4% higher than the 1.05% industry average. Furthermore, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 40.61%, 21.36%, and 19.07%, respectively,  are higher than the 17.20%, 7.91%, and 6.12% industry averages.

Discounted Valuation

In terms of forward EV/EBIT, SCVL’s 6.28x is 47.2% lower than the 11.90x industry average. Its forward non-GAAP P/E of 7.50x is 43.3% lower than the 13.22x industry average. And the stock’s 0.69x and 5.58x respective forward EV/S and EV/EBITDA are significantly lower than the 1.18x and 9x industry averages.

POWR Ratings Show Promise

SCVL has an overall B rating, which equates to a Buy in our POWR Ratings system. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight distinct categories. Among these categories, SCVL has a B grade for Quality, which is in sync with its higher-than-industry profitability ratios.

SCVL also has a B grade for Sentiment, which is consistent with its revenue and earnings growth estimates. In addition, the stock has a B grade for Value, in sync with its lower-than-industry valuation ratios.

Beyond what I have stated above, we have also given SCVL grades for Growth, Stability, and Momentum. Get all the SCVL ratings here.

SCVL is ranked #15 out of 66 stocks in the A-rated Fashion & Luxury industry.

Bottom Line

SCVL reported impressive fiscal fourth-quarter results despite rising COVID-19 cases and labor and supply shortages. It is well-positioned to benefit from the strong retail demand. So, we think it could be wise to buy the current dip in the stock.

How Does Shoe Carnival (SCVL) Stack Up Against its Peers?

SCVL has an overall POWR Rating of B. One could also check out these other stocks within the Fashion & Luxury industry with an A (Strong Buy) rating: J. Jill, Inc. (JILL - Get Rating), Hugo Boss AG (BOSSY - Get Rating), and PVH Corp. (PVH - Get Rating).

SCVL shares were trading at $30.21 per share on Monday afternoon, down $0.54 (-1.76%). Year-to-date, SCVL has declined -22.56%, versus a -4.46% rise in the benchmark S&P 500 index during the same period.

About the Author: Nimesh Jaiswal

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...

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