Steven Madden has gotten torched over the last six months - since October 2024, its stock price has dropped 46.5% to $26.58 per share. This was partly driven by its softer quarterly results and might have investors contemplating their next move.

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.

Even with the cheaper entry price, we're sitting this one out for now. Here are three reasons why SHOO doesn't excite us and a stock we'd rather own.

Why Is Steven Madden Not Exciting?

As seen in the infamous Wolf of Wall Street movie, Steven Madden (NASDAQ:SHOO) is a fashion brand famous for its trendy and innovative footwear, appealing to a young and style-conscious audience.

1. Long-Term Revenue Growth Disappoints

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Unfortunately, Steven Madden’s 5% annualized revenue growth over the last five years was sluggish. This fell short of our benchmark for the consumer discretionary sector.

2. EPS Barely Growing

Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.

Steven Madden’s EPS grew at an unimpressive 6.8% compounded annual growth rate over the last five years. On the bright side, this performance was better than its 5% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.

3. Mediocre Free Cash Flow Margin Limits Reinvestment Potential

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Steven Madden has shown mediocre cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 9%, subpar for a consumer discretionary business.

Final Judgment

Steven Madden isn’t a terrible business, but it isn’t one of our picks. After the recent drawdown, the stock trades at 10.4× forward price-to-earnings (or $26.58 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 one of our all-time favorite software stocks.

Stocks We Would Buy Instead of Steven Madden

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