Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Lumber Liquidators (NYSE: LL) is taking it on the chin this morning. Despite an earnings report that showed a big bounceback from last quarter's disappointment, investors are panning the company and sending shares down as much as 11% in early Wednesday trading.

So what: Three months ago, this discount hardwood retailer and Motley Fool Rule Breakers recommendation stunned investors with the revelation that a botched SAP (NYSE: SAP) installation had cost it a 45% decline in earnings. Today's news wasn't quite that bad -- profits were down "only" 17%, while sales grew a respectable 12%. The company's 1.2% rise in same-store sales lagged performance at key rival Home Depot (NYSE: HD) but edged out the 1.1% growth at Lowe's (NYSE: LOW).

Now what: LL bulls will tell you today's sell-off makes Lumber Liquidators a bargain. Don't believe it. Even if the company succeeds in hitting forecasts for the current year, that would make for only 28% year-over-year growth -- no more than a fair price for a stock that now costs 27 times earnings. And growth always slows over time. Long term, analysts don't expect this stock to grow earnings faster than in the high teens. (And did I mention -- free cash flow has run negative for two years straight?)

Long story short, you can't build a solid portfolio with warped wood. And Lumber Liquidators? This stuff is only good for kindling.

Think I'm wrong? Want to prove it? Click over to Motley Fool CAPS and go on record in favor of Lumber Liquidators -- then add the stock to your watchlist, to make sure when the good news arrives, you're first in line to hear it.

Fool contributor Rich Smith does not own shares of, nor is he short, any company named above. Home Depot and Lowe's are Motley Fool Inside Value recommendations. Lumber Liquidators Holdings is a Motley Fool Rule Breakers selection. Motley Fool Options has recommended writing covered calls on Lowe's. The Fool owns shares of Lumber Liquidators Holdings. The Motley Fool has a disclosure policy.

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