) has seen some excellent growth and just posted a solid quarter.
The company is poised to open several new stores and it is a Zacks
Rank #1 (Strong Buy), it is the Bull of the Day.
Growing Stores, Growing Revenue, Expanding Margins
When I look at a stock, I want to see growing earnings and growing
revenues. When I see growing revenues I want to see quality growth
and I will see that in an increasing number of stores opening. Of
those new stores, I want to see higher productivity than the
existing stores as management applies lessons learned. This will
also serve to expand margins.
These things don't always happen, but they are happening for Lumber
Liquidators. Store growth has been consistent, albeit slowing from
a 20%+ pace in 2011 to a roughly 10% annual rate in 2012. More
importantly there has been the idea of increased productivity from
the new stores. Sales per square foot productivity based on a
calculation of the difference between sales growth and comps
divided by growth in square footage shows significant and steady
increases in productivity.
Gross margins have grown in each quarter over the last seven
quarters. That growth in margins has also led to the EBITDA line
which has seen steady expansion as well. What that will lead to is
significantly higher earnings per share.
Lumber Liquidators is a specialty retailer of hardwood flooring,
and hardwood flooring enhancements and accessories. The company
provides various wood flooring products, including prefinished
domestic and exotic hardwoods, engineered hardwoods, unfinished
hardwoods, bamboo, cork, and laminates, as well as resilient
flooring products. As of April 24, 2013, it operated 290 retail
locations in North America. The company was founded in 1994 and is
headquartered in Toano, Virginia.
LL Beats Estimates In Each Of The Last Five
Dating back to the March 2012 quarter, has beaten the Zacks
Consensus Estimate in each of the last five quarters. The June 2012
quarter saw the company post $0.43, $0.14 ahead of the estimate for
a 48% positive earnings surprise. The following quarter saw another
twelve cent beat which translated into a 35% positive earnings
The most recent quarterly report took place on April 24. The
company posted revenues of $230M and EPS of $0.57, $0.13 ahead of
the $0.44 Zacks Consensus Estimate for a 29% positive earnings
surprise. Revenues came in 6.6% ahead of expectations as well.
Sales per Square Foot
In the world of retail, sales per square foot is the end all and be
all measurement of performance. Over each of the last five
quarters, LL has posted an annual increase in sales per square
foot. That rate of growth has been nothing short of impressive,
with sales increasing 2.4% in 1Q12 and 11.6% in 1Q13. The quarters
in-between that time also showed growth, so it was not just a
sudden jolt of growth.
LL Sees Estimates Moving Higher
Aggressive growth investors want to see earnings estimates move
higher and higher. The most recent beat resulted in just that, as
the estimates for both 2013 and 2014 kicked higher. Estimates moved
higher by $0.14 to $2.15 after a late January earnings report.
Following a late April report, estimates bounced to $2.38 from
$2.15 or an increase of $0.23. 2014 saw increases of $0.14 and
$0.16 over same time period.
The valuation for LL is pretty stretched right now, but there are
plenty of signs that suggest that growth will bring these metrics
down a bit. The stock is trading at 42x trailing earnings and 25x
forward estimates. Both of those metrics are well above the
industry averages of 23x and 20x respectively. Book value is
roughly double the industry average and price to sales is even a
little more stretched than that. One metric I have been focusing on
more and more is the net margin and how it compares to the industry
average. LL has a 6.4% net margin, while the industry average is at
4.4%, and that 200 basis point outperformance is a big reason it
can carry those other premium metrics.
A quick look at the price and consensus chart and you can see that
the market has really taken a liking to LL. Over the last year and
a quarter, the stock has done almost nothing but go straight up. As
a frequent flyer on the new highs list, we expect the stock to
continue to hit new highs and reward investors.
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.
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LUMBER LIQUIDAT (LL): Free Stock Analysis
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