Water-Logged And Getting Wetter: 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 "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) 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 $47.0 million.
  • LL has traded 1.9 million shares today.
  • LL traded in a range 215.8% of the normal price range with a price range of $7.37.
  • LL traded below its daily resistance level (quality: 300 days, meaning that the stock is crossing a resistance level set by the last 300 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on LL:

Lumber Liquidators Holdings, Inc., together with its subsidiaries, operates as a multi-channel specialty retailer of hardwood flooring, and hardwood flooring enhancements and accessories. LL has a PE ratio of 38.1. Currently there are 3 analysts that rate Lumber Liquidators Holdings a buy, 1 analyst rates it a sell, and 5 rate it a hold.

The average volume for Lumber Liquidators Holdings has been 756,100 shares per day over the past 30 days. Lumber Liquidators has a market cap of $2.4 billion and is part of the services sector and retail industry. The stock has a beta of 1.36 and a short float of 27.4% with 7.67 days to cover. Shares are down 17.7% year-to-date as of the close of trading on Friday.

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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 5.9%. Since the same quarter one year prior, revenues rose by 22.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • LUMBER LIQUIDATORS HLDGS INC has improved earnings per share by 48.0% 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 $2.77 versus $1.68 in the prior year. This year, the market expects an improvement in earnings ($3.50 versus $2.77).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Specialty Retail industry average. The net income increased by 50.6% when compared to the same quarter one year prior, rising from $13.81 million to $20.80 million.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Specialty Retail industry and the overall market, LUMBER LIQUIDATORS HLDGS INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • 40.84% 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 8.04% 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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