Floored, but far from out

We've seen this play before

Lumber Liquidators (LL) was a market darling one year ago. The stock had run from a 2011 low of $13.40 to a high of $120. Earnings were zooming higher, and the shares fetched north of a 43x multiple.

Three consecutive disappointing quarters have sent LL back down to $49.15. Management has guided 2014 EPS down to a range from $2.38-$2.52. That compared with previous expectations of about $2.75.

At the new 52-week low set on Oct. 23, 2014, LL is now trading for about 20.5x this year’s and 17.6 times 2015's newly reduced projection. While not cheap, this is a stock that has traditionally commanded premium valuations.

The firm has some positive attributes. It is debt-free, has no defined benefit plan to deal with and holds a reasonable amount of cash.

Lumber Liquidators has worked through down periods before. EPS declined from $0.97 in 2009 to $0.93 in 2010, then flattened at that level in 2011. Traders who gave up on LL as a growth vehicle missed the previously mentioned 795% 26-month run to $120.

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