It's been a good week for Lumber Liquidators Holdings, Inc. (NYSE:LL) shareholders, because the company has just released its latest annual results, and the shares gained 8.4% to US$10.50. It looks like a credible result overall - although revenues of US$1.1b were what analysts expected, Lumber Liquidators Holdings surprised by delivering a (statutory) profit of US$0.34 per share, an impressive 36% above what analysts had forecast. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
Taking into account the latest results, the latest consensus from Lumber Liquidators Holdings's seven analysts is for revenues of US$1.13b in 2020, which would reflect a reasonable 3.2% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to bounce 124% to US$0.75. Yet prior to the latest earnings, analysts had been forecasting revenues of US$1.13b and earnings per share (EPS) of US$0.40 in 2020. Although the revenue estimates have not really changed, we can see there's been a considerable lift to earnings per share expectations, suggesting that analysts have become more bullish after the latest result.
The consensus price target rose 6.8% to US$9.40, suggesting that higher earnings estimates flow through to the stock's valuation as well. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Lumber Liquidators Holdings at US$10.00 per share, while the most bearish prices it at US$7.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Lumber Liquidators Holdings shareholders.
In addition, we can look to Lumber Liquidators Holdings's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. It's clear from the latest estimates that Lumber Liquidators Holdings's rate of growth is expected to accelerate meaningfully, with forecast 3.2% revenue growth noticeably faster than its historical growth of 1.9%p.a. over the past five years. Compare this with other companies in the same market, which are forecast to see a revenue decline of 6.0% next year. So it's clear that despite the acceleration in growth, Lumber Liquidators Holdings is expected to grow meaningfully slower than the market average.
The Bottom Line
The most important thing to take away from this is that analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Lumber Liquidators Holdings following these results. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Lumber Liquidators Holdings's revenues are expected to perform worse than the wider market. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Lumber Liquidators Holdings analysts - going out to 2024, and you can see them free on our platform here.
You can also see whether Lumber Liquidators Holdings is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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