The latest issue of Barron’s lavishes praise on Steve Madden while stating that SHOO sports a price-earnings ratio below those of its rivals. Here is a chart from their article…

While their title is “Getting No Respect” I find that hard to swallow. The shares had risen 406% from their 2009 low of $8.90 and 92.3% from their 52-week nadir of $23.41 (to $45.04) at the time of the article.

Perhaps more egregious though is the implication that SHOO, at 17.2x this year’s estimate is cheap. That’s among the highest multiples of the past dozen years for these shares and well above their 10-year median P/E of 13x.

The last three times that SHOO traded for 16.4x or higher were in early 2000, late 2003 and towards the end of 2006. In each case SHOO proceeded to tank. They went from a split-adjusted $10.10 to $2.40 in late 2000, from $10.50 to $6.90 from 2003 to 2004 and plunged from $29.80 to $8.90 from the 2006 peak to the 2008 trough.

NOTE: The 22 P/E listed for 2004 was the result of earnings dropping from $0.64 to $0.38 and not from investor enthusiam.

Value Line uses a 12x multiple in projecting their 3 – 5 year target price range of $35 - $55 /share. They only arrive at that level by assuming that earnings grow to $3.75 per share over that period. Even if those optimistic projection play out, Value Line sees the possibility of a 10 point decline from today’s price.

It is interesting to note that Value Line’s timeliness system ranks SHOO as a best buy on momentum at the same time they point out their gross overvaluation based on all past performance.

Insiders have been selling while not one has bought over the past 12 months.

Caveat Emptor.

It’s not clear whether big IPOs come out because markets are hot or if that’s the only time you can get them done at good prices. Either way it’s a rarity when huge debuts occur in less tyhan robust environments.

Based on these quotes…What do you think?

Source: NY Times Nov. 19, 2010

Amid all the hoopla about GM’s IPO last week was a feeling that somehow the bailout had ‘worked out well’ for taxpayers. Barron’s was nice enough to publish the truth about where we stand so far.          

    GM common shares need to rise by another 54% just to get even for citizens. The sad reality is that U.S. citizens posted a $4.5 billion loss on the shares already sold and that doesn’t include any of the President Bush era bailout money which is long gone and never to be recovered. It also doesn’t take into account the billions poured in GMAC (now renamed Ally Bank).

It’s my guess that any move to $53 on the shares may take years to come in a best case and may never happen in reality. Once GM starts showing consistent profits the UAW will go right back to crippling the company.

Those trumpeting the ‘success’ of the bailout also ignore the foregone future tax payments that came with letting the post-bankruptcy GM keep the billions in tax-loss carry forwards that normally would not be available to them. Ford, which avoided taking public funds, has to pay taxes on future earnings while GM will not be paying one cent in corporate taxes for years to come, if not decades.

This reported ‘triumph’ is really a loser on all counts thus far.

Dr. Paul Price