Is Now An Opportune Moment To Examine Shoe Carnival, Inc. (NASDAQ:SCVL)?

Shoe Carnival, Inc. (NASDAQ:SCVL), 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$34.49 at one point, and dropping to the lows of US$24.71. 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 Shoe Carnival's current trading price of US$25.77 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Shoe Carnival’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 Shoe Carnival

What's the opportunity in Shoe Carnival?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 5.13x is currently trading slightly below its industry peers’ ratio of 6.12x, which means if you buy Shoe Carnival today, you’d be paying a decent price for it. And if you believe that Shoe Carnival should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Is there another opportunity to buy low in the future? Since Shoe Carnival’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Shoe Carnival look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With revenues expected to grow by a double-digit 12% over the next couple of years, the outlook is positive for Shoe Carnival. If the level of expenses is able to be maintained, 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? SCVL’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at SCVL? 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 tabs on SCVL, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for SCVL, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you'd like to know more about Shoe Carnival as a business, it's important to be aware of any risks it's facing. Our analysis shows 2 warning signs for Shoe Carnival (1 can't be ignored!) and we strongly recommend you look at them before investing.

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

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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.