Yahoo Finance Should You Be Adding Shoe Carnival (NASDAQ:SCVL) To Your Watchlist Today?
For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
In contrast to all that, many investors prefer to focus on companies like Shoe Carnival (NASDAQ:SCVL), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Shoe Carnival with the means to add long-term value to shareholders.
Check out our latest analysis for Shoe Carnival
How Quickly Is Shoe Carnival Increasing Earnings Per Share?
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That makes EPS growth an attractive quality for any company. Recognition must be given to the that Shoe Carnival has grown EPS by 50% per year, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.
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!
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
Fortunately, we've got access to analyst forecasts of Shoe Carnival's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Shoe Carnival Insiders Aligned With All Shareholders?
It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
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. US$255m That level of investment from insiders is nothing to sneeze at.
While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. 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. For companies with market capitalisations between US$400m and US$1.6b, like Shoe Carnival, the median CEO pay is around US$4.0m.
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 compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
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. It is worth noting though that we have found 1 warning sign for Shoe Carnival that you need to take into consideration.
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.
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.
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