Lumber Liquidators (LL) Should See a Substantial Recovery in Price: CR

Shares of Lumber Liquidators Holdings, Inc. (LL) are up 11.23% to $31.09 in early trading on Tuesday, boosted by positive Citron Research comments, suggesting the stock’s move lower may be overdone.

In its report, Citron states: “In sharp contrast to Mr. Larson’s statement on 60 Minutes, CARB, the only currently active formaldehyde emission regulatory agency in the U.S., clearly states that it does not recommend removing non-compliant flooring products. In most situations, absent any observable health reactions they simply recommend ventilating closed-in indoor space until they outgas.”

Citron also said that “Given the current short position in the stock (~34% float) and substantially reduced market cap ($700 million), should Lumber Liquidators survive this episode with a somewhat moderate sales impact, and less than anticipated damage settlement, we will most likely see a substantial recovery in share price from current levels.”

Lumber Liquidators is printing a higher than average trading volume with the issue trading 3.7 million shares, compared to the average volume of 2.51 million. The stock began trading this morning at $29.10 to currently trade up $3.14 from the prior days close of $27.95. On an intraday basis it has gotten as low as $29.10 and as high as $31.35.

On valuation measures, Lumber Liquidators shares are currently priced at 13.31x this year’s forecasted earnings, which makes them relatively inexpensive compared to the industry’s 22.38x earnings multiple. The company’s current year and next year EPS growth estimates stand at 13.90% and 19.00% compared to the industry growth rates of 11.00% and 19.80%, respectively. LL has a t-12 price/sales ratio of 0.72. EPS for the same period registers at $2.31.

LL shares have declined 57.46% in the last 4 weeks and 54.35% in the past three months. Over the past 5 trading sessions the stock has lost 28.02%. Shares of Lumber Liquidators Holdings, Inc. are down 57.85% this year.

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