) has seen estimates for 2013 and 2014 continue to fall throughout
the year. A recent big move lower has pushed the Zacks Rank to the
lowest level. LQDT is a Zacks Rank #5 (Strong Sell). It is the Bear
of the Day.
One big reason estimates continue to fall is that the company
guided analysts lower following the most recent earnings release.
The company told Wall Street they expect earnings per share of
between $0.39 and $0.43, but the Wall Street Consensus for the
quarter was $0.46.
Liquidity Services operates various online auction marketplaces for
surplus, salvage, and scrap assets. The company's auction
marketplaces include liquidation.com that enables corporations to
sell surplus and salvage consumer goods and capital assets;
govliquidation.com, which enables selected federal government
agencies to sell surplus and scrap assets; and govdeals.com that
enables local and state government entities, including city,
county, and state agencies, as well as school boards and public
utilities to sell surplus and salvage assets. Liquidity Services
was founded in 1999 and is headquartered in Washington, District of
LQDT is a prime example of why you cannot put too much faith in a
company that is always beating the number. Seems they have topped
the Zacks Consensus Estimate in each of the last seven quarters,
but did they really? The last three quarters were all beats of a
penny, and the most recent beat came after the company lowered
guidance in the middle of the quarter.
Things were much better at the end of 2011 and the start of 2012.
The company was beating the number soundly, including beats of 39%
and 45% for the December 2011 and March 2012 quarters. LQDT was a
big winner for subscribers of Home Run Investor, a service that
looks for aggressive growth from small cap stocks, during that
period of outperformance.
Earnings Estimates Slip
Estimates for LQDT have been sliding lower all year. Starting in
January, the 2013 Zacks Consensus Estimate was $1.81, but that soon
fell to $1.72 the following month. Estimates dropped to $1.58 in
July and are now at $1.50.
2014 Estimates have also been slashed. The year started off with
expectations of $2.36. That seems like a lifetime ago and current
estimates are calling for $1.66.
2013 is expected to have -8% earnings growth, while the ship is
slated to turn around in 2014 with 10% earnings growth.
The valuation picture for LQDT is one that is in line with the
industry average. Trailing PE shows the company trading at a
minimal discount to the industry average while the forward PE has
the company trading at a slight premium. Price to book and price to
sales are mostly in line with the industry averages. The real
issues are margins, with LQDT showing a net margin of 7.6% while
the industry average is up around 12.2%. Factor in the 10.7%
expected EPS growth rate for 2014 and compare that to a 15.6%
industry average and you can see that there are probably better
spots to look.
The price and consensus chart really tells the story of what is
going on at LQDT. The estimates have been pointing the wrong way,
sliding lower over time. The stock is following the estimate lines
lower and the only question becomes when can the company improve
margins and earnings growth? Right now, a safer spot in the auction
market might be found in BID.
Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor
in charge of the
Run Investor service
, a Buy and Hold service where he recommends the stocks in the
Brian is also the editor of
Breakout Growth Trader
a trading service that focuses on small cap stocks and also carries
a risk limiting strategy. Subscribers get daily emails along with
buy, and sell alerts.
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LIQUIDITY SVCS (LQDT): Free Stock Analysis
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