Storm The Castle: Lumber Liquidators Holdings (LL)

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 Lumber Liquidators Holdings ( LL) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Lumber Liquidators Holdings as such a stock due to the following factors:

  • LL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $85.6 million.
  • LL has traded 541,863 shares today.
  • LL is trading at 5.25 times the normal volume for the stock at this time of day.
  • LL crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on LL:

Lumber Liquidators is the largest direct retailer in the United States, specializing in hardwood flooring (as ranked by Floor Focus Magazine in their November 2003 issue). We have one of the largest inventories of pre-finished and unfinished hardwood flooring in the industry. LL has a PE ratio of 37.9. Currently there are 4 analysts that rate Lumber Liquidators Holdings a buy, 1 analyst rates it a sell, and 4 rate it a hold.

The average volume for Lumber Liquidators Holdings has been 996,000 shares per day over the past 30 days. Lumber Liquidators has a market cap of $2.6 billion and is part of the services sector and retail industry. The stock has a beta of 1.13 and a short float of 30.9% with 5.93 days to cover. Shares are down 6.7% year-to-date as of the close of trading on Tuesday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Lumber Liquidators Holdings as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth, compelling growth in net income, notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 6.8%. Since the same quarter one year prior, revenues rose by 24.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • LUMBER LIQUIDATORS HLDGS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, LUMBER LIQUIDATORS HLDGS INC increased its bottom line by earning $1.68 versus $0.93 in the prior year. This year, the market expects an improvement in earnings ($2.75 versus $1.68).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Specialty Retail industry. The net income increased by 58.3% when compared to the same quarter one year prior, rising from $12.88 million to $20.40 million.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Specialty Retail industry and the overall market, LUMBER LIQUIDATORS HLDGS INC's return on equity exceeds that of both the industry average and the S&P 500.
  • 41.83% is the gross profit margin for LUMBER LIQUIDATORS HLDGS 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 8.02% is above that of the industry average.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.
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