Caleres Inc (CAL, Financial), a prominent footwear retailer, experienced a daily loss of 7.1%, yet it has managed to secure a 3-month gain of 5.52%. With an Earnings Per Share (EPS) of $4.37, investors are keen to understand: is Caleres fairly valued? This article delves into a valuation analysis to answer this pivotal question and encourages readers to explore the detailed financial insights that follow.
Company Overview
Caleres Inc (CAL, Financial) is a well-established footwear retailer in the United States, operating through its famous Footwear and Brand Portfolio segments. The company's current stock price is $29.45, with a market cap of $1 billion. When compared to the GuruFocus Fair Value (GF Value) of $27.32, Caleres appears to be trading around its fair value. This initial comparison sets the stage for an in-depth examination of the intrinsic value of Caleres, blending financial analysis with key company details.
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value, incorporating historical trading multiples, a GuruFocus adjustment factor based on past performance, and future business performance estimates. If Caleres' stock price significantly diverges from the GF Value Line, it suggests a potential overvaluation or undervaluation. At present, Caleres (CAL, Financial) is deemed fairly valued by the GF Value, indicating that its stock price is in line with the company's estimated fair value.
As Caleres is considered fairly valued, the expected long-term return of its stock should align with the company's business growth rate.
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Financial Strength Assessment
Investing in companies with robust financial strength is crucial to mitigate the risk of permanent loss. Caleres' cash-to-debt ratio of 0.04 is lower than 91.16% of its peers in the Retail - Cyclical industry, suggesting a need for caution. The company's overall financial strength is rated 5 out of 10, indicating it is fair but not without its risks.
Profitability and Growth Prospects
Caleres has maintained profitability for 7 out of the past 10 years, with a revenue of $2.80 billion and an EPS of $4.37 over the last twelve months. Its operating margin of 6.87% is commendable, ranking above 66.55% of its industry counterparts. The company's profitability rank is 6 out of 10, reflecting fair profitability.
Growth is a critical component of valuation, and Caleres' 3-year average annual revenue growth of 13.8% is impressive, surpassing 74.55% of industry competitors. However, its 3-year average EBITDA growth rate is 0%, which is concerning.
Evaluating ROIC vs. WACC
Comparing Return on Invested Capital (ROIC) with the Weighted Average Cost of Capital (WACC) provides insight into a company's profitability relative to its capital costs. Caleres' ROIC of 11.78 is significantly higher than its WACC of 6.08, indicating the company is generating value for its shareholders.
Final Thoughts on Caleres' Valuation
In conclusion, Caleres (CAL, Financial) appears to be fairly valued given its current financial condition and profitability. Despite facing growth challenges, the company's ability to create value is evident through its ROIC exceeding its WACC. For a more comprehensive understanding of Caleres' financial health, investors can review its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
