FND - Embedded Expectations Analysis - 2018 02 06
─ Floor & Decor Holdings, Inc. (FND:USA) currently trades at historical high relative to UAFRS-based (Uniform) Earnings, with a 40.5x Uniform P/E, implying bullish expectations for the firm. However, management has concerns about growth, investments, and brand awareness─ Specifically, management may lack confidence in the sustainability of comparable store sales growth, and may also be exaggerating the extent to which they differentiate themselves through investments in their supply chain and experienced merchants. Additionally, they may be concerned about lagging hurricane impacts in Houston, and may lack confidence in their claim that consumers love the fashion components of FND products. Moreover, they may lack confidence in their brand awareness growth, and may be concerned regarding increased inventory levels
Floor & Decor Holdings is a holding company. Through its subsidiaries, the company is a specialty retailer of hard surface flooring and related accessories. The company's customers include installers and commercial businesses, Do It Yourself customers and customers who buy the products for installation. The company's primary product categories include Tile, Wood, Laminate/Luxury Vinyl Plank, Natural Stone, Decorative Accessories, and Installation Materials and Tools. In addition to its stores, the company's website FloorandDecor.com showcases its products, provides informational training and design ideas and has its products available for sale, which a customer can pick up in store or have delivered.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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