Trade-Ideas: Lumber Liquidators Holdings (LL) Is Today's

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 Lumber Liquidators Holdings ( LL) as a "barbarian at the gate" (strong stocks crossing above resistance 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 $42.3 million.
  • LL has traded 1.4 million shares today.
  • LL traded in a range 203.8% of the normal price range with a price range of $1.94.
  • LL traded above its daily resistance level (quality: 22 days, meaning that the stock is crossing a resistance level set by the last 22 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' 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 positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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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 23. Currently there are no analysts that rate Lumber Liquidators Holdings a buy, no analysts rate it a sell, and 11 rate it a hold.

The average volume for Lumber Liquidators Holdings has been 3.6 million shares per day over the past 30 days. Lumber Liquidators has a market cap of $563.0 million and is part of the services sector and retail industry. The stock has a beta of 2.66 and a short float of 41.3% with 4.27 days to cover. Shares are down 68.9% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Lumber Liquidators Holdings as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.1%. Since the same quarter one year prior, revenues slightly increased by 5.5%. 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's debt-to-equity ratio is very low at 0.06 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.31 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. In comparison to the other companies in the Specialty Retail industry and the overall market, LUMBER LIQUIDATORS HLDGS INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • Net operating cash flow has decreased to $13.16 million or 40.98% 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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