Louisiana-Pacific (LPX) In A Perilous Reversal

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.

Trade-Ideas LLC identified Louisiana-Pacific ( LPX) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Louisiana-Pacific as such a stock due to the following factors:

  • LPX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $50.8 million.
  • LPX has traded 392,761 shares today.
  • LPX is down 3.1% today.
  • LPX was up 5.4% yesterday.

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More details on LPX:

Louisiana-Pacific Corporation, together with its subsidiaries, primarily manufactures and sells building products for use in new home construction, repair and remodeling, outdoor structures, and light industrial and commercial construction. Currently there are 4 analysts that rate Louisiana-Pacific a buy, 2 analysts rate it a sell, and 5 rate it a hold.

The average volume for Louisiana-Pacific has been 2.4 million shares per day over the past 30 days. Louisiana-Pacific has a market cap of $2.3 billion and is part of the services sector and wholesale industry. The stock has a beta of 0.75 and a short float of 22.2% with 9.56 days to cover. Shares are down 1.6% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Louisiana-Pacific as a hold. Among the primary strengths of the company is its solid financial position based on a variety of debt and liquidity measures that we have evaluated. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.

Highlights from the ratings report include:
  • The debt-to-equity ratio is somewhat low, currently at 0.68, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with this, the company maintains a quick ratio of 3.71, which clearly demonstrates the ability to cover short-term cash needs.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 15.0%. Since the same quarter one year prior, revenues slightly dropped by 5.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • LOUISIANA-PACIFIC CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, LOUISIANA-PACIFIC CORP swung to a loss, reporting -$0.52 versus $1.22 in the prior year. This year, the market expects an improvement in earnings (-$0.21 versus -$0.52).
  • The gross profit margin for LOUISIANA-PACIFIC CORP is currently extremely low, coming in at 4.98%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -9.45% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$22.60 million or 214.72% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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