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Today's Dead Cat Bounce Stock: La-Z-Boy (LZB)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified La-Z-Boy ( LZB) as a "dead cat bounce" (down big yesterday but up big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified La-Z-Boy as such a stock due to the following factors:

  • LZB has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $18.6 million.
  • LZB has traded 54,851 shares today.
  • LZB is up 3% today.
  • LZB was down 8.1% yesterday.

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More details on LZB:

La-Z-Boy Incorporated manufactures, markets, imports, distributes, and retails upholstery products, accessories, and casegoods furniture products in the United States and Canada. The company also produces reclining chairs and manufactures/distributes residential furniture in the United States. The stock currently has a dividend yield of 1%. LZB has a PE ratio of 20.6. Currently there are 4 analysts that rate La-Z-Boy a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for La-Z-Boy has been 364,400 shares per day over the past 30 days. La-Z-Boy has a market cap of $1.2 billion and is part of the consumer goods sector and consumer durables industry. The stock has a beta of 1.73 and a short float of 3.4% with 2.24 days to cover. Shares are down 19.9% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates La-Z-Boy as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins, solid stock price performance and growth in earnings per share. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:

  • LZB's revenue growth trails the industry average of 17.4%. Since the same quarter one year prior, revenues slightly increased by 3.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • LZB's debt-to-equity ratio is very low at 0.02 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, LZB has a quick ratio of 1.86, which demonstrates the ability of the company to cover short-term liquidity needs.
  • 36.55% is the gross profit margin for LA-Z-BOY INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 4.70% is above that of the industry average.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 32.20% over the past year, a rise that has exceeded that of the S&P 500 Index. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • LA-Z-BOY INC's earnings per share improvement from the most recent quarter was slightly positive. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, LA-Z-BOY INC reported lower earnings of $0.84 versus $1.65 in the prior year. This year, the market expects an improvement in earnings ($1.13 versus $0.84).

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