What a brutal six months it’s been for Shoe Carnival. The stock has dropped 30.2% and now trades at $21.01, rattling many shareholders. This may have investors wondering how to approach the situation.

Is now the time to buy Shoe Carnival, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.

Why Do We Think Shoe Carnival Will Underperform?

Even though the stock has become cheaper, we're swiping left on Shoe Carnival for now. Here are three reasons why you should be careful with SCVL and a stock we'd rather own.

1. Shrinking Same-Store Sales Indicate Waning Demand

Same-store sales show the change in sales for a retailer's e-commerce platform and brick-and-mortar shops that have existed for at least a year. This is a key performance indicator because it measures organic growth.

Shoe Carnival’s demand has been shrinking over the last two years as its same-store sales have averaged 5.9% annual declines.

2. Fewer Distribution Channels Limit its Ceiling

With $1.18 billion in revenue over the past 12 months, Shoe Carnival is a small retailer, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with suppliers.

3. Projected Revenue Growth Shows Limited Upside

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 Shoe Carnival’s revenue to stall, a deceleration versus This projection doesn't excite us and suggests its products will face some demand challenges.

Final Judgment

Shoe Carnival falls short of our quality standards. Following the recent decline, the stock trades at 7.4× forward EV-to-EBITDA (or $21.01 per share). This valuation tells us a lot of optimism is priced in - you can find more timely opportunities elsewhere. Let us point you toward one of our top software and edge computing picks.

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