5-Star Stocks Poised to Pop: Lumber Liquidators

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, hardwood flooring retailer Lumber Liquidators Holdings (NYSE: LL  ) has earned a coveted five-star ranking.

With that in mind, let's take a closer look at Lumber Liquidators' business and see what CAPS investors are saying about the stock right now.

Lumber Liquidators facts

Headquarters (Founded) Toano, Va. (1994)
Market Cap $433.5 million
Industry Home improvement retail
Trailing-12-Month Revenue $635.6 million
Management CEO Jeffrey Griffiths (since 2006)
CFO Daniel Terrell (since 2006)
Return on Capital (Average, Past 3 Years) 17.7%
Cash/Debt $33.4 million / $0
Competitors Lowe's (NYSE: LOW  )
Home Depot (NYSE: HD  )

Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.

On CAPS, 96% of the 614 members who have rated Lumber Liquidators believe the stock will outperform the S&P 500 going forward. These bulls include kenjotto and All-Star TMF1000, who is ranked in the top 0.5% of our community.

Earlier this month, kenjotto tapped Lumber Liquidators as a tempting turnaround play:

They seem to be struggling with some execution issues, but overall they have a strong balance sheet and a competitive business model. ... Once we get through this scary softpatch, and people go back to investing in their homes (either cause they are stuck there or think they can sell) they'll be knocking on LL's door.

Lumber Liquidators even boasts $33 million in cash on its balance sheet with zero debt. Meanwhile, main rivals Lowe's and Home Depot sport debt-to-equity ratios of 0.4 and 0.6, respectively.

CAPS All-Star TMF1000 elaborates on the bull case:

LL is quickly building stores. They have an advantage. Their stores are smaller, cheap to open and they can open many of them in large or small markets. Their stores ramp up quickly and are profitable very quickly. They have opened 339 stores without picking up debt. That is always good. ...

I like leaders, but leaders in a weak industry can face problems. [T]hey are affected by home remodeling activity, employment levels, housing turnover, real estate prices, new housing starts, consumer confidence, credit availability and the general health of consumer discretionary spending. No one can know the direction of these many complex economic issues that affect this leader. ... But their growth prospects are huge. As they execute provided they can, this could be a big winner, especially if the housing market improves.

What do you think about Lumber Liquidators, or any other stock for that matter? If you want to retire rich, you need to put together the best portfolio you can. Owning exceptional stocks is a surefire way to secure your financial future, and on Motley Fool CAPS, thousands of investors are working every day to find them. CAPS is 100% free, so get started!

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of Lumber Liquidators, Home Depot, and Lowe's, as well as writing covered calls on Lowe's. The Motley Fool owns shares of Lumber Liquidators. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.


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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 28, 2011, at 11:12 AM, torpex77 wrote:

    I like the company, especially at this price.

    But their biggest weakness is their name.

    "Lumber Liquidators" says "2nd hand 2x4s", not "inexpensive new hardwood flooring".

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