Three 'Shoe' Things: These Stocks Will Fit Traders and Investors

Pardon the pun in my title, but these footwear companies are among the very best values on my radar screen right now. Caleres , Designer Brands and Wolverine Worldwide remain highly profitable. Each pays a well-covered dividend and sells for just a fraction of my calculated fair value estimate. DBI and WWW carved out new two-year lows this week. CAL plunged from north of $28 to south of $20 in less than a month. It is scary to see that kind of price action on stocks you own and like. Times like that send me back to the fundamentals to see if I am the crazy one or everybody else is. Here are the earnings per share estimates for the current year as well as 2023 on this trio as listed on Yahoo Finance. I see nothing upsetting at all. In fact, all three names are incredibly cheap on both absolute and relative valuations compared with all previous years. I'll show you detailed information on their prior histories shortly. From multiples of 4.5-times to 6.7-times trailing earnings there is an extremely high probability of seeing price-to-earnings expansion and almost no chance to go much lower. P/E expansion is the magic elixir that turns even modest profit gains into enormous shareholder gains. Each of the stocks trades well off their recent peak prices. Caleres' price is down less than the others, only because it held up better before its recent selloff. It is now down about 52.5% from an all-time high of $41.09, set during summer of 2018. The graphic shown earlier showed where they would trade over the coming year at just 10-times earnings. Based on former histories though, future P/Es could easily exceed that by quite a bit. CAL posted an average P/E of 13.9-times from 2014 through 2019. EPS ranged from $1.72 to $2.21 back then. Top ticks in those years ranged from $23.98 to $41.09. Now, with EPS set to be north of $4 for the second straight year, you would expect CAL to be much higher. Instead we can now own these shares for under $20. That is less than half their old P/Es on record results. A revaluation to a still below normal 12-times this year's earnings suggest $50 or better awaits patient traders. CAL gave shareholders exit opportunities at $29.36 or higher during eight of the last nine years including 2022 year-to-date. Designer Brands is even more undervalued than that based on its former trading history. Its average P/E ran 16.8-times from 2012 through 2019. EPS ranged from $1.46 to $1.69 while the stock peaked each year at from $22.70 to $47.50. Fiscal 2022 guidance now sits at $1.75 this year and about $1.86 for Fiscal 2023. Traders could exit for more than double, and sometimes triple, today's quote during every one of the past 10 years. There is no reason to suspect we won't get those same types of chances again before too long. WWW is perhaps the most promising of the three names. Its Dec. 20 low was the absolute bottom in over a full decade. It trades right now at a 20% discount to its Covid-panic nadir. EPS that year came in at just $0.93 vs. this year's estimate of $1.45 in EPS. Smart traders who bought the covid low saw WWW surge from $12.20 to $44.70 (+266%) in just 12-months. WWW's typical P/E is about 16.6-times. A rebound to even 14-times next year's estimate justifies a 13-month target price of $24.36. That implies upside of almost 150% on top of a generous 4.09% in yield while you wait. Corporate insiders showed confidence in WWW's prospects this month by ponying up over $1.11 million to buy shares on the open market recently at an average cost of $10.47. Who knows better what a company is worth than its CEO, CFO and COO? There is no good explanation for why these stocks have fared so badly. The only obvious culprit is P/E contraction that took them to absurdly low prices despite fine results. As with DBI, owners of WWW had annual chances to sell at double to triple the current price. All you need to make he gains on these stocks is the willingness to buy when others are selling and a bit of patience. It never took long from the previous lows to see large percentage gains. Risk is now extremely low on all three, thanks to their incredibly depressed valuations. Don't miss your chance to see outsized rebounds once again.

Three 'Shoe' Things: These Stocks Will Fit Traders and Investors

These footwear companies will look great in your portfolio. Let me show you how to break them in.

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