If EPS Growth Is Important To You, Shoe Carnival (NASDAQ:SCVL) Presents An Opportunity

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Shoe Carnival (NASDAQ:SCVL). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

Check out our latest analysis for Shoe Carnival

How Quickly Is Shoe Carnival Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Shoe Carnival's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 50%. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Shoe Carnival maintained stable EBIT margins over the last year, all while growing revenue 9.3% to US$1.3b. That's encouraging news for the company!

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Shoe Carnival's future profits.

Are Shoe Carnival Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

For the sake of balance, it should be noted that Shoe Carnival insiders sold US$81k worth of shares last year. But this is outweighed by the trades from Independent Director Charles Tomm who spent US$162k buying shares, at an average price of around US$27.03. And that's a reason to be optimistic.

On top of the insider buying, we can also see that Shoe Carnival insiders own a large chunk of the company. Owning 38% of the company, insiders have plenty riding on the performance of the the share price. Those who are comforted by solid insider ownership like this should be happy, as it implies that those running the business are genuinely motivated to create shareholder value. This insider holding amounts to That level of investment from insiders is nothing to sneeze at.

Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because Shoe Carnival's CEO, Mark Worden, is paid at a relatively modest level when compared to other CEOs for companies of this size. Our analysis has discovered that the median total compensation for the CEOs of companies like Shoe Carnival with market caps between US$400m and US$1.6b is about US$3.9m.

Shoe Carnival offered total compensation worth US$2.2m to its CEO in the year to January 2022. That comes in below the average for similar sized companies and seems pretty reasonable. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Should You Add Shoe Carnival To Your Watchlist?

Shoe Carnival's earnings per share have been soaring, with growth rates sky high. The cherry on top is that insiders own a bunch of shares, and one has been buying more. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Shoe Carnival deserves timely attention. Still, you should learn about the 2 warning signs we've spotted with Shoe Carnival (including 1 which is potentially serious).

Keen growth investors love to see insider buying. Thankfully, Shoe Carnival isn't the only one. You can see a a free list of them here.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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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.