The home improvement industry sky-rocketed amid the COVID-19 pandemic as people spent significant time at home and adopted a hybrid work culture. Adi Tatarko, the co-founder and CEO of Houzz, said recently, “I think people loved their homes before, but they didn’t spend much time there. The needs [for the house] came together with it during COVID.”
With the hybrid work culture expected to persist for the foreseeable future, the home improvement industry should grow. According to a Research and Markets report, the global home improvement market is expected to grow at a 5.6% CAGR to $1.98 trillion by 2026.
Therefore, we think home improvement stocks Leslie’s, Inc. (LESL) and GrowGeneration Corp. (GRWG) could be solid additions to one’s watchlist now. Wall Street analysts expect them to rally by 40% or more in price in the near term.
Leslie’s, Inc. (LESL)
Phoenix, Ariz.-based LESL operates as a direct-to-consumer pool and spa care brand and serves residential, professional, and commercial consumers. Through its brands—Jacuzzi, Hayward, and Natural Chemistry—it offers products under various categories, including pool chemicals, pool equipment, lifestyle, spas, and parts.
On August 4, Mike Egeck, the company’s CEO, said, “We delivered a record third quarter, marking the largest sales, gross profit, and EBITDA quarter in our history. These results reflect the great efforts and contributions of all of our associates and vendor partners who navigated constrained supply chains to meet elevated consumer demand. This financial performance also demonstrates continued strong execution against our strategic initiatives.”
LESL’s sales came in at $596.54 million for its fiscal third quarter, ended July 3, 2021, up 24.3% year-over-year. The company’s adjusted net income was $124.40 million, representing a 68.8% year-over-year rise. And its adjusted EBITDA was $179.30 million, up 49.7% year-over-year. Furthermore, its adjusted EPS increased 36.2% year-over-year to $0.64.
For its fiscal year 2021, analysts expect LESL’s revenue to be $1.32 billion, representing an 18.7% year-over-year rise. Also, the company’s EPS is expected to increase 100% year-over-year to $0.84 in the current year. In addition, it surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 8.9% in price to close yesterday’s trading session at $21.95. Wall Street analysts expect the stock to hit $31.75 in the near term, which indicates a potential 44.7% upside.
GrowGeneration Corp. (GRWG)
Farm supply company GRWG in Denver, Colo., owns and operates retail hydroponic and organic gardening stores. It markets and distributes horticultural, organics, lighting, and hydroponics products. In addition, it offers products and services online through GrowGen.Pro.
In October, GRWG and Groundwork BioAg forged a distribution agreement to offer DYNOMYCO, a unique brand of highly-concentrated mycorrhizal inoculants formulated explicitly for cannabis. This initiative is expected to help expand the company’s portfolio of offerings.
For its fiscal third quarter, ended September 30, 2021, GRWG’s sales increased 110.9% year-over-year to $116 million. Its net income increased 20.6% year-over-year to $4.03 million, while its EPS increased 16.7% year-over-year to $0.07. Moreover, its adjusted EBITDA came in at $10.79 million, up 63.5% year-over-year.
GRWG’s revenue is expected to be $437.53 million in its fiscal year 2021, representing a 126.3% year-over-year rise. The company’s EPS is expected to increase 163.6% year-over-year to $0.29 in the current year. The stock has declined 30.5% in price over the past month to close yesterday’s session at $15.44. However, Wall Street analysts expect the stock to hit $31 in the near term, which indicates a potential 100.8% upside.
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LESL shares were trading at $21.96 per share on Wednesday morning, up $0.01 (+0.05%). Year-to-date, LESL has declined -20.86%, versus a 26.52% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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