What a brutal six months it’s been for Steven Madden. The stock has dropped 35.1% and now trades at $27.25, rattling many shareholders. This may have investors wondering how to approach the situation.
Is there a buying opportunity in Steven Madden, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Is Steven Madden Not Exciting?
Even though the stock has become cheaper, we're cautious about Steven Madden. Here are three reasons why we avoid SHOO and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Regrettably, Steven Madden’s sales grew at a sluggish 5.7% compounded annual growth rate over the last five years. This was below our standard for the consumer discretionary sector. 
2. EPS Barely Growing
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Steven Madden’s EPS grew at an unimpressive 9.2% compounded annual growth rate over the last five years. On the bright side, this performance was better than its 5.7% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.
3. Cash Flow Margin Set to Decline
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Over the next year, analysts predict Steven Madden’s cash conversion will fall. Their consensus estimates imply its free cash flow margin of 7.1% for the last 12 months will decrease to 5.3%.
Final Judgment
Steven Madden isn’t a terrible business, but it doesn’t pass our bar. Following the recent decline, the stock trades at 14.2× forward P/E (or $27.25 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're fairly confident there are better investments elsewhere. Let us point you toward a top digital advertising platform riding the creator economy.
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