Foot Locker, Inc. (FL) Has Good Years Ahead

Shoe Carnival is not exactly a direct competitor since the company does not focus on athletic shoes.  However, the company does a substantial athletic shoe business, and as a discounter, tends to benefit from bargain-hunters during uncertain economic times.

Shoe Carnival actually looks like a very well-priced investment, trading at 14.1 times earnings with a very nice forward growth rate of 16.5% projected.  However, as a smaller company there is more risk involved than with Foot Locker.  While this valuation looks very cheap, I am extremely skeptical that they will be able to actually deliver on the projected growth rate.

Conclusion/Target

I believe that as long as Foot Locker works to keep up with the changing retail environment (i.e., increased online presence, mobile sales, etc.), they should have no problems growing as projected.  Assuming their P/E ratio remains the same (which I believe is rather conservative), I think this will be a $39 stock in a year, or about 17% above the current level.

The article This Leading Shoe Retailer Has Good Years Ahead originally appeared on Fool.com and is written by Matthew Frankel.

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