At the current price of $10, what is the market’s view of Wolverine World Wide’s future operating performance? Wolverine World Wide’s common shares will need to reach $17 to achieve average annual stock market performance of 9.0% over the next 6 years. Upper quartile performance will require a $20 Wolverine World Wide stock price by 2029.
Executive Summary
- Key Wolverine World Wide characteristics: stability, low profitability, very low expected growth, and low financial strength. A big negative influence on Wolverine World Wide’s valuation is its poor Risk Profile.
- Average valuation, below market shareholder returns. Current valuation levels are average relative to the Wolverine World Wide Peer Group. Recent market returns have underperformed the Wolverine World Wide Peer Group. Total shareholder returns expected to significantly lag the overall equity market. Based on current investor expectations, Wolverine World Wide shares should reach a level of $9 by 2029 — an 1.9% per year total shareholder return. A 2029 stock price of $17 would reflect median performance and a price of $20 would be required to reach upper quartile performance.
- Wolverine World Wide’s achieved growth is average. Historical growth has been average relative to the Wolverine World Wide Peer Group and forecasted growth is relatively very low. Equity Growth, and Asset Growth have lagged. These factors have negatively affected market perceptions of Wolverine World Wide. Wolverine World Wide’s historical income statement growth has been higher than growth in the balance sheet. Revenue growth has exceeded asset growth; earnings growth has exceeded equity growth resulting in an improving return on equity.
- Asset Turnover is group leading. Pretax ROA, Pretax Margin, and Return on Equity are group lagging. The company has very high excess cash and will have to work to reinvest at attractive returns to support profitability and valuation.
- Risk Profile has been Wolverine World Wide’s biggest valuation weakness. Wolverine World Wide’s risk profile is unfavorable. Overall variability has been very high with very high revenue variability, very low E.P.S. variability, and very high stock price volatility. Financial Strength is very low and earnings’ expectations are very low. The debt/capital ratio has risen.
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