By now you've heard the news about Lumber Liquidators
Bad news? Sure. But has the massive sell-off turned this stock into a buy?
I asked three Fool.com analysts to ponder that question and then posed them another: If Lumber Liquidators is not a buy, is there a better stock to target in the retail segment?
Rich Duprey, Fool.com contributor
Although the market splintered Lumber Liquidators' stock after it ran second-quarter guidance through a buzz saw, I'm not sure I'd be walking over to pick up the pieces -- or shares -- just yet.
Even after being put on the chopping block, the flooring specialist still trades at 16 times management's upper end of earnings estimates for 2011, more than either Lowe's
And you can't sweep under the rug the fact that housing won't recover until next year at the earliest, assuming unemployment makes it down to 8%. But as last week's jobs numbers show, private sector hiring is exceptionally weak, and joblessness remains north of 9%.
However, Lumber Liquidators isn't a homebuilder, so it's not crumbling. Like Sherwin-Williams
But I'd look first for a solid foundation forming under housing and employment before fitting Lumber Liquidators into your portfolio like a tight tongue-and-groove joint.
Alyce Lomax, Fool.com contributor
The housing market still stinks, and subsequent softened consumer demand led to the market's recent hatchet job on Lumber Liquidators. Should investors knock on wood and hope there's now a floor beneath this company's stock price? I don't think so. With continued high unemployment adding to the economy's woes, I doubt droves of consumers will motivate to improve their surroundings in any meaningful way. Lumber Liquidators' hardwood flooring products scream "housing bubble" more than bargain.
I'd avoid any stocks that directly relate to homeownership or home improvement right now, including Home Depot and Lowe's.
Investors are better off with a true-blue retailer like Costco
Rick Munarriz, Fool.com contributor
I'm not ready to tell Lumber Liquidators to walk the plank.
Is this a lousy time to be selling classy hardwood flooring? Yes. When nearly a fifth of the mortgage holders out there owe more than their homes are worth, there's no point in upgrading residences that may be handed back to the bank. However, as the niche leader with the economies of scale to deliver the best pricing on stylish flooring, Lumber Liquidators should be the first to bounce back.
It's important to remember that the retailer remains very profitable during this cyclical rough patch.
Unlike Builders FirstSource
Foolish bottom line
So there you have it -- just one in favor of the hardwood flooring specialist and two against. For what it's worth, I'm also inclined to pick up shares of Lumber Liquidators, but I may wait until the sawdust settles from this recent shake-up. What do you think? Is now the time to tuck into some Lumber Liquidators?
Jim Royal, Ph.D., does not own shares of any company mentioned here. The Motley Fool owns shares of Costco and Lumber Liquidators. Motley Fool newsletter services have recommended buying shares of Lumber Liquidators, Costco, Sherwin-Williams, Home Depot, and Lowe's. Motley Fool newsletter services have recommended writing covered calls in Lowe's. 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 Motley Fool has a disclosure policy.