Maxwell Shoe Company Inc Case Solution

1. Is Maxwell a buy? Why?

Founded in 1949, Maxwell Shoe Company deals in footwear and targets the moderate price market segment by selling the products at departmental stores, retailers, and speciality stores. Focussed on its branded strategy for the footwear, Maxell enhanced its financial strength by building relationships with suppliers and the customers, establishing a firm brand recognition and adoption of economies of scale through bulk buying from the foreign manufacturers at low cost. With the availability of many prospective opportunities to exploit such as introducing new brands and enhancement of the current brands; the company has abundant potential to grow. Therefore, on 18 December, 1998 a brokerage report recommended the company to be a strong buy just some months after the September 28, 1998 published an article regarding buying rating of the Maxwell Shoe. Therefore, there was a concern about the validation of the statement.

A company is a strong buy if there is future potential of uptrend of its stocks in the market. Moreover, the company should not only be able to outperform in the market indices but also it should have strong fundamentals. Hence, based on the brokerage report regarding the Maxwell Shoe Company and the financial statements in the exhibit 2 of the case, different measures are taken into consideration which is important for decision making that whether the company holds the rating of a strong buy.