What a brutal six months it’s been for Wolverine Worldwide. The stock has dropped 27.2% and now trades at $12.09, rattling many shareholders. This was partly driven by its softer quarterly results and might have investors contemplating their next move.

Is there a buying opportunity in Wolverine Worldwide, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.

Despite the more favorable entry price, we're swiping left on Wolverine Worldwide for now. Here are three reasons why WWW doesn't excite us and a stock we'd rather own.

Why Do We Think Wolverine Worldwide Will Underperform?

Founded in 1883, Wolverine Worldwide (NYSE: WWW) is a global footwear company with a diverse portfolio of brands including Merrell, Hush Puppies, and Saucony.

1. Revenue Spiraling Downwards

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, Wolverine Worldwide’s demand was weak and its revenue declined by 5% per year. This was below our standards and signals it’s a low quality business.

2. EPS Trending Down

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Sadly for Wolverine Worldwide, its EPS declined by 17.2% annually over the last five years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.

3. Previous Growth Initiatives Have Lost Money

Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Wolverine Worldwide’s five-year average ROIC was negative 1.8%, meaning management lost money while trying to expand the business. Its returns were among the worst in the consumer discretionary sector.

Final Judgment

We see the value of companies helping consumers, but in the case of Wolverine Worldwide, we’re out. After the recent drawdown, the stock trades at 8.3× forward price-to-earnings (or $12.09 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are more exciting stocks to buy at the moment. We’d recommend looking at the Amazon and PayPal of Latin America.

Stocks We Like More Than Wolverine Worldwide

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