Steve Madden (NASDAQ:SHOO) Stock Gained 69% In The Last Five Years

November 12, 2019 Steve Madden

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, long term Steven Madden, Ltd. (NASDAQ:SHOO) shareholders have enjoyed a 69% share price rise over the last half decade, well in excess of the market return of around 45% (not including dividends). However, more recent returns haven’t been as impressive as that, with the stock returning just 4.4% in the last year , including dividends .

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Over half a decade, Steven Madden managed to grow its earnings per share at 4.4% a year. This EPS growth is lower than the 11% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. That’s not necessarily surprising considering the five-year track record of earnings growth.

The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Steven Madden, it has a TSR of 74% for the last 5 years. That exceeds its share price return that we previously mentioned. And there’s no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It’s good to see that Steven Madden has rewarded shareholders with a total shareholder return of 4.4% in the last twelve months. And that does include the dividend. Having said that, the five-year TSR of 12% a year, is even better. Potential buyers might understandably feel they’ve missed the opportunity, but it’s always possible business is still firing on all cylinders. Before spending more time on Steven Madden.