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Anatomy of Success: Shoe Carnival (SCVL)

Madeleine Johnson
Updated

The Zacks Rank methodology is a unique way to discover some of the best companies to invest in, and is a useful tool for beginner and more experienced investors alike; it identifies companies both big and small that have the right characteristics to produce superior gains.

When a company earns that coveted Zacks Rank #1 (Strong Buy) label, its means they have a high probability of outperforming the market over the next one to three months. But, achieving this high rank is not an easy thing to do, as only 5% of companies within the Zacks Rank universe earn this position.

Below, we highlight a stock that has evolved into a strong player in the broad retail industry, and by following our ranking system, investors could have realized major gains.

Shoe Carnival Inc. (SCVL)

Headquartered in Evansville, IN, Shoe Carnival is a footwear retailer that offers customers a broad assortment of moderately priced dress, casual, and athletic footwear for men, women, and children; the company carries national and regional name brands. Shoe Carnival operates over 400 stores throughout the U.S. and Puerto Rico, and offers online shopping at www.shoecarnival.com.

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SCVL was first added to the #1 (Strong Buy) list right after the shoe retailer reported solid third quarter fiscal 2017 results back in November. Both earnings and revenues beat our Zacks Consensus Estimate, with earnings growing over 22% and sales up 4.7% from the prior-year period. Comparable store sales saw nice growth of 4.4%, and inventory was down 4.3% on a per-store basis. As a result, SCVL raised its fiscal year outlook. Shares of Shoe Carnival closed at $26.75 that day.

Not long after, SCVL was made a top-ranked stock once again in late December, most likely due to lingering analyst bullishness on the stock thanks to its Q3 report. It maintained this Strong Buy run for about a month.

The stock was added to the #1 list again after reporting great Q2 2018 results in late May. Earnings of 83 cents per share easily beat our consensus estimate (EPS also surged nearly 73% from the year-ago period), while net sales increased 1.6% year-over-year. Comps were up 1.3%, and inventory fell 1.6% on a per-store basis. Additionally, SCVL repurchased 810,613 shares of common stock at a total cost of $19 million under a share repurchase program. Overall, management believes Shoe Carnival is well-positioned heading into the second half of the year, and raised both the low and high end of its diluted EPS guidance for 2018. Six months after first becoming a #1 (Strong Buy), the company’s stock price was up over 22% to $32.76 per share.

Shoe Carnival is currently a #2 (Buy) on the Zacks Rank, and has gained about 170% over the past one-year period. But since it was added to the #1 list, the stock is up almost 60% from its current levels.

This table shows the price performance of SCVL (in red), as well as the 12-month forward looking EPS estimate (in green) from the time the stock first earned a Zacks Rank #1 (Strong Buy). During this stretch, SCVL never moved lower than a Zacks Rank #3 (Hold).

By utilizing the Zacks Rank, investors are able to easily identify elite stocks that are best positioned to beat the market on a consistent basis, and how to hold those top stocks as they continue to grow.

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Much like petroleum 150 years ago, lithium battery power is set to shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge. With battery prices plummeting and charging stations set to multiply, revenues that were already at $31 billion in 2016 are expected to blast to over $67 billion by the end of 2022. See Zacks Best EV Stock Free >>


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