Based in Atlanta, Georgia, Floor & Décor Holdings Inc. (FND) is a leading, high-growth specialty retailer of hard surface flooring, with 166 warehouse-format stores and five design studios in 34 states as of March 31, 2022. .
Shares of the company are down 22.9% over the past year and 42% year-to-date to close yesterday’s trading session at $75.39. Although the company posted strong performance in its recent earnings report, its declining results and high valuations are cause for concern.
Additionally, last month the stock was downgraded by Gordon Haskett equity researchers to an “accumulated” rating from a “buy” rating, making its short-term outlook uncertain.
Here’s what could shape FND’s performance in the short term:
FND’s net sales increased 31.5% year-over-year to $1.03 billion in the first quarter ended March 31, 2022. However, its operating expenses increased 30.3 % compared to their value the previous year at $314.09 million. Its operating profit fell 2.1% from the year-ago quarter to $93.97 million. And the company’s net profit fell 6.4% year-over-year to $70.95 million. Its loss per share was $0.66 over that period. Additionally, its cash and cash equivalents were $31.83 million, representing a decline of 77.2% for the three months ended March 31, 2022.
In non-GAAP forward P/E terms, the stock is currently trading at 26.24x, 115.6% higher than the industry average of 12.17x. Additionally, its EV/Futures Sales of 20.21x is 96.4% above the industry average of 1.10x. Additionally, FND’s 1.84x futures price/sales is 106.2% above the industry average of 0.89x.
POWR ratings reflect bleak outlook
FND has an overall D rating, which equates to a sell in our proprietary POWR rating system. POWR ratings are calculated by considering 118 separate factors, with each factor weighted to an optimal degree.
Our proprietary scoring system also rates each stock against eight distinct categories. FND has a D for Value, which is justified given the company’s valuation above that of the industry.
Of the 63 stocks in the C-rated home improvement and property sector, FND is ranked No. 57.
Beyond what I said above, FND ratings for growth, quality, stability, momentum, and sentiment can be seen here.
FND’s deteriorating bottom line and stretched valuations could raise concerns among investors about its outlook. Additionally, the company continues to grapple with the impact of the pandemic on associates, customers, business partners and the supply chain. Additionally, the stock is currently trading below its 50-day and 200-day moving averages of $8.01 and $108.82, respectively, indicating a downtrend. So, we think it’s best to avoid the stock now.
How does Floor & Décor Holdings Inc. (FND) compare to its peers?
Although FND has an overall D rating, one might consider its industry peers, Acuity Brands Inc. (AYI), which has an overall A rating (Strong Buy), and Builders FirstSource Inc. (BLDR) and Haverty Furniture Companies Inc. (HVT) which have an overall rating of B (buy).
Note that BLDR is one of the few stocks hand-picked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Growth portfolio. Learn more here.
FND shares were trading at $77.68 per share Thursday morning, up $2.29 (+3.04%). Year-to-date, the NDF is down -40.25%, compared to a -13.32% rise in the benchmark S&P 500 over the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college, she majored in finance and is currently pursuing the CFA program and is a Level II candidate. After…