After witnessing solid improvement last year, the home improvement industry still remains strong, as consumers continue to make their living places better for remote work, education, and leisure. Since people are now more inclined to revamp existing spaces within their homes, reorganize home storage such as closets and garages, as well as improve outdoor living spaces, companies catering to home improvement projects are seeing a wave of strong demand now.
Additionally, low mortgage rates are encouraging many people to buy larger living spaces, which should keep fueling the demand for home décor items and tools. Moreover, rising home costs could lead millennials, who are just starting their careers, to buy existing homes that generally require remodeling. This would also lead to a higher demand for maintenance and repair works.
Against this strong industry backdrop, we believe key industry players, such as Lumber Liquidators Holdings, Inc. (LL) and Haverty Furniture Companies, Inc. (HVT) are favorably positioned to enjoy a high growth trajectory and deliver solid returns in the near term.
Lumber Liquidators Holdings, Inc. (LL)
Based in Virginia, LL is a multi-channel specialty retailer of hard-surface flooring, and hard-surface flooring enhancements and accessories. The company provides hardwood products, porcelain tile flooring products, and a selection of flooring enhancements and accessories. It also markets in-home delivery and installation services primarily to homeowners.
LL’s net sales have increased 12.1% year-over-year to $296 million in the third quarter that ended September 30, 2020. The company’s comparable store sales increased 10.9%, primarily due to healthy consumer demand for home improvement projects. Its gross margin increased 320 basis points from its year-ago value to 39.4%, while its gross profit rose 22%.
The company has beaten the Street’s EPS estimates in each of the four trailing quarters. The consensus revenue estimate of $283.83 million for the next quarter, ending March 31, 2021, represents a 6.2% increase year-over-year. The stock has gained 281% over the past year.
LL’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
LL has a grade of A for Value and Momentum, and B for Quality. Of the 64 stocks in the A-rated Home Improvement & Goods industry, LL is ranked #2.
In total, we rate LL on eight different levels. Beyond what we stated above we also have given LL grades for Stability, Sentiment, and Growth. Get all the LL ratings here.
Haverty Furniture Companies, Inc. (HVT)
Founded in 1885, HVT operates as a specialty retailer of residential furniture and accessories in the United States. It sells furniture merchandise, custom upholstery products, and mattress product lines under the brand names – Havertys, Sealy, Tempur-Pedic, Serta, Stearns & Foster, and others.
HVT’s net sales increased 3.9% year-over-year to $217.51 million in the third quarter that ended September 30, 2020. The company’s comparable-store sales increased by 4%. Gross profit margin grew 270 basis points from the prior-year quarter to 56.2%, while net income increased 199.5% year-over-year to $18.26 million. Its EPS rose 212.9% from the year-ago value to $0.97 over this period.
The consensus EPS estimate of $0.36 for the next quarter ending March 30, 2021, indicates a 300% improvement year-over-year. Moreover, HVT has beaten the Street’s EPS estimates in three of the four trailing quarters, which is impressive. The consensus revenue estimate of $193.86 million for the next quarter indicates an 8% increase from the same period last year. The stock has gained 72.3% over the past year.
It is no surprise that HVT has an overall rating of A, which translates to Strong Buy in our POWR Ratings system. HVT has an A grade for Quality, Momentum, and Growth. In the same industry, it is ranked #1.
In addition to the POWR Ratings grades I’ve just highlighted, you can see the HVT ratings for Stability, Value, and Sentiment here.
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LL shares were trading at $28.63 per share on Tuesday afternoon, up $0.36 (+1.27%). Year-to-date, LL has declined -6.86%, versus a 5.06% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...
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