At US$33.24, Is It Time To Put Steven Madden, Ltd. (NASDAQ:SHOO) On Your Watch List?

Steven Madden, Ltd. (NASDAQ:SHOO), is not the largest company out there, but it received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$36.22 at one point, and dropping to the lows of US$30.63. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Steven Madden's current trading price of US$33.24 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Steven Madden’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Steven Madden

Is Steven Madden Still Cheap?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 14.17x is currently trading slightly above its industry peers’ ratio of 13.6x, which means if you buy Steven Madden today, you’d be paying a relatively reasonable price for it. And if you believe that Steven Madden should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Although, there may be an opportunity to buy in the future. This is because Steven Madden’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will Steven Madden generate?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 35% over the next couple of years, the future seems bright for Steven Madden. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has already priced in SHOO’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at SHOO? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on SHOO, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for SHOO, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Steven Madden at this point in time. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Steven Madden.

If you are no longer interested in Steven Madden, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.