Shoe Carnival, Inc. (SCVL) in Evansville, Ind., is one of the nation's leading family footwear shops, offering a diverse selection of dress, casual, and sports footwear for men, women, and children, with a focus on national brand names. As of May 18, 2022, the company operated 395 stores under the Shoe Carnival and Shoe Station labels in 35 states and Puerto Rico.

In terms of forward non-GAAP P/E, the stock is currently trading at 6.84x, which is 42.6% lower than the 11.91x industry average. Also, its 0.60x forward EV/Sales is 43.7% lower than the 1.07x industry average. Furthermore, SCVL's 0.55x forward Price/Sales is 39.7% lower than the 0.91x industry average. The stock is down 17.2% in price over the past year and 3.5% over the past month to close yesterday's trading session at $28.62. Furthermore, the stock is currently trading 38.1% below its 52-week high of $46.21, which it hit on Nov. 18, 2021.

However, the company intends to launch 10 new stores in its fiscal year 2022, anticipates no store closures, and expects to have more than 400 stores by fiscal 2022. It is now updating its stores and expects to have more than half of them updated by the summer of 2023, with the whole program completed by the end of its fiscal 2024. By the first quarter of 2022, 31% of the company's fleet will be completed.

Here is what could shape SCVL's performance in the near term:

Strong Profitability

SCVL's 10.5% trailing-12-months net income margin is 58.1% higher than the 6.6% industry average. Also, its ROC, EBITDA margin, and ROA are 150.9%, 30.3%, and 165.6% higher than the respective industry averages. Furthermore, its 1.64% asset turnover ratio is 56.4% higher than the 1.05% industry average.

Impressive Growth Prospects

The Street expects SCVL's revenues and EPS to rise 7.3% and 10.8%, respectively, year-over-year to $1.51 billion and $4.51in its fiscal 2024. In addition, SCVL's EPS is expected to rise at a 10% CAGR over the next five years. Also, the company has an impressive earnings surprise history; it topped Street EPS estimates in all the trailing four quarters.

Consensus Rating and Price Target Indicate Potential Upside

The sole Wall Street analyst that rated SCVL rated it Buy. The 12-month median price target of $47 indicates a 64.2% potential upside.

POWR Ratings Reflect Solid Prospects

SCVL has an overall B grade, which equates to a Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. SCVL has a B grade for Quality and Value. SCVL's solid earnings and revenue growth potential are consistent with its Quality grade. In addition, the company's lower-than-industry multiples are in sync with the Value grade.

Among the 68 stocks in the B-rated Fashion & Luxury industry, SCVL is ranked #12.

Beyond what I stated above, we have graded SCVL for Sentiment, Growth, Stability, and Momentum. Get all SCVL ratings here.

Bottom Line

SCVL is well-positioned to benefit from strong retail demand. In addition, given the stock's discounted valuation and the company's robust profitability, it could be an opportune time for investors to scoop up its shares.

How Does Shoe Carnival Inc. (SCVL) Stack Up Against its Peers?

SCVL has an overall POWR B Rating, which equates to a Buy rating. Check out these other stocks within the same industry with A (Strong Buy) ratings: J.Jill Inc. (JILL), Hugo Boss AG (BOSSY), and Caleres Inc. (CAL).

Click here to checkout our Retail Industry Report for 2022

SCVL shares were trading at $28.96 per share on Friday morning, up $0.34 (+1.19%). Year-to-date, SCVL has declined -25.53%, versus a -13.10% rise in the benchmark S&P 500 index during the same period.

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.

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