Perilous Reversal Stock: 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 "perilous reversal" (up big yesterday but down big today) 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 $46.3 million.
  • LL has traded 98,063 shares today.
  • LL is down 3.3% today.
  • LL was up 7.1% yesterday.

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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 21.6. Currently there are 3 analysts that rate Lumber Liquidators Holdings a buy, no analysts rate it a sell, and 8 rate it a hold.

The average volume for Lumber Liquidators Holdings has been 1.1 million shares per day over the past 30 days. Lumber Liquidators has a market cap of $1.5 billion and is part of the services sector and retail industry. The stock has a beta of 1.19 and a short float of 24.4% with 4.53 days to cover. Shares are down 42.4% year-to-date as of the close of trading on Wednesday.

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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 revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • LL's revenue growth has slightly outpaced the industry average of 0.5%. Since the same quarter one year prior, revenues slightly increased by 2.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • LL has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.37 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • 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. Compared to other companies in the Specialty Retail industry and the overall market on the basis of return on equity, LUMBER LIQUIDATORS HLDGS INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • 40.38% is the gross profit margin for LUMBER LIQUIDATORS HLDGS INC which we consider to be strong. Regardless of LL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 6.31% trails the industry average.
  • LUMBER LIQUIDATORS HLDGS INC's earnings per share declined by 17.8% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, LUMBER LIQUIDATORS HLDGS INC increased its bottom line by earning $2.77 versus $1.68 in the prior year. For the next year, the market is expecting a contraction of 2.3% in earnings ($2.71 versus $2.77).

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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