Steven Madden (NASDAQ:SHOO) designs and distributes men's and women's footwear and accessories, and primarily focuses on North American markets. The stock has returned 10.32% YTD and currently trades at the mid-point of its 52-week range between $27.80 and $45.70, amounting to a market capitalization of $1,687M. At the current price of $38.06, the stock is trading at 14.19x the current fiscal year estimated EPS and 8.77x the LTM EBITDA. I believe SHOO should warrant a bullish consideration based on the following reasons:
- Analysts expect top line to rise by 25.8% and 11.0% over the current and next fiscal years, and EPS to grow at 19.0% and 14.9% over the same horizons. Taking the growth prospects into consideration, the stock is trading at a reasonable 3-year expected PEG of 0.91x.
- According to the comparable analysis below, SHOO outperforms its industry peers across all the profitability, growth, and free cash flow metrics. I believe the firm should merit a valuation premium of 10-20% to both the peer average P/E and EV/EBITDA multiples. Based on a 15% premium, the relative valuation model yields a fair stock value of $42, suggesting an 11% potential upside.
- SHOO has a healthy balance sheet. As at Q1 2012, the firm is sitting on $67M cash and has no debt. Both the current and quick ratios are very solid at 2.4x and 1.8x, respectively.
- Of the 9 analyst ratings for the stock, there are 3 strong buys, 2 buys, and 4 holds. The mean target price is $50.33, implying a solid 32% upside potential.
- According to the table below, estimated EPS have multiple upward revisions over the past 90 days, suggesting analysts are increasingly optimistic about the firm.
- SHOO has consistently beaten both revenue and EPS estimated over the past 8 consecutive quarters.
EPS tables are sourced from Yahoo Finance, Comparable Analysis and Valuation tables are created by author, and financial data is sourced from company 10-Q, 10-K, press release, Yahoo Finance, YCharts, Wall Street Journal, Thomson One, Bloomberg and Morningstar.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in SHOO over the next 72 hours.