Over the past six months, Steven Madden’s shares (currently trading at $36.11) have posted a disappointing 14.4% loss, well below the S&P 500’s 16.9% gain. This might have investors contemplating their next move.
Is there a buying opportunity in Steven Madden, or does it present a risk to your portfolio? Get the full stock story straight from our expert analysts, it’s free.
Despite the more favorable entry price, we don't have much confidence in Steven Madden. Here are three reasons why there are better opportunities than SHOO and a stock we'd rather own.
Why Is Steven Madden Not Exciting?
As seen in the infamous Wolf of Wall Street movie, Steven Madden (NASDAQ:SHOO) is a fashion brand famous for its trendy and innovative footwear, appealing to a young and style-conscious audience.
1. Long-Term Revenue Growth Disappoints
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Steven Madden grew its sales at a sluggish 4.5% compounded annual growth rate. This was below our standard for the consumer discretionary sector. 
2. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Steven Madden’s revenue to rise by 4.8%. While this projection indicates its newer products and services will spur better top-line performance, it is still below the sector average.
3. EPS Barely Growing
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Steven Madden’s EPS grew at an unimpressive 6.7% compounded annual growth rate over the last five years. On the bright side, this performance was better than its 4.5% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.
Final Judgment
Steven Madden isn’t a terrible business, but it doesn’t pass our quality test. Following the recent decline, the stock trades at 12.7× forward price-to-earnings (or $36.11 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're fairly confident there are better stocks to buy right now. We’d recommend looking at a top digital advertising platform riding the creator economy.
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