Lumber Liquidators (NYSE: LL) is
the largest specialty retailer of hardwood flooring in the United States. Product lines include prefinished domestic and exotic hardwoods, engineered hardwoods, unfinished hardwoods, bamboo, cork, and laminates. Altogether, the firm offers 150 varieties of flooring. These are sold from 124 stores in 44 states, via catalogs, over the Internet and through a Virginia call center. Competitors include Home Depot (NYSE: HD) and Lowe's Companies (NYSE: LOW).
The firm surprised the Street last week, when it reported Q4 EPS of 12 cents and revenues of $105.5 million. Analysts had been expecting ten cents and $102.2 million. In discussing the solid numbers, the CEO pointed to growth-oriented infrastructure investments and a higher-margin merchandise assortment. Management also guided FY08 EPS to 70-78 cents (73 cent consensus) and FY08 revenues to $475-$490 million ($483.27M consensus).
The stock
popped through 30-day and 50-day moving average resistance on the news and has since been defining a bullish "pennant" consolidation pattern. Stocks frequently exit pennants moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Brokers recommend the issue with two "strong buys", one "buy" and one "hold". Analysts see a 38% percent average annual growth rate, through the next five years. The LL Price to Sales ratio (0.62), Price to Book ratio (2.72), Sales Growth rate (24.41%), EPS Growth rate (71.43%), Return on Assets (10.97%), Return on Investment (16.51%) and Return on Equity (26.12%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 59% of the outstanding shares. Over the past 52 weeks, the stock has traded between $5.68 and $10.49. A stop-loss of $8.25 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.
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