Why Is Analog Devices (ADI) Down 2.4% Since Last Earnings Report?
Shares of Louisiana-Pacific Corporation LPX have gained 3.4% so far this year compared with the industry’s gain of 1.7%.
Again, Louisiana-Pacific’s trailing 12-month return on equity (ROE) supports growth potential. ROE in the trailing 12 months is 25.4%, higher than the industry average of 20.4%. This indicates the company’s efficient usage of shareholders’ funds.
Recently, the company reported first-quarter 2018 results, wherein earnings improved considerably by 65.8% from the year-ago quarter’s tally and sales increased 13% year over year. Adjusted EBITDA from continuing operations was $159 million in the quarter, up 39.5% from $114 million in the prior-year quarter.
Moreover, earnings estimates for the company have exhibited an uptrend, reflecting analysts’ optimism in the stock’s prospects. The Zacks Consensus Estimate for the company’s current-year earnings rose 7.4% while that of next year increased 4.2%, over the past 30 days.
This positive trend signifies bullish analyst sentiments. The company’s Zacks Rank #2 (Buy) indicates robust fundamentals and expectations of outperformance in the near term.
Let us delve into other factors which make this stock a lucrative pick.
Positive Industry Outlook: The construction industry looks positive with healthy economy and strong job market that will continue to drive the stock higher. Though steel and aluminum tariffs are expected to raise construction costs along with labor shortages, overlooking the sector is not prudent.
The Zacks Building Products - Wood industry currently ranks among the top 5%, indicating that companies in this space are poised to benefit from favorable broader factors in the immediate future.
Valuation Looks Rational: Louisiana-Pacific has a Value Style Score of B, putting it into the top 40% of all stocks we cover from this perspective.
Louisiana-Pacific currently has a trailing 12-month P/E ratio of 10.3, below the industry’s average of 21.6x. This indicates that the stock is undervalued compared with its peers. Also, the company has a forward P/E ratio of 9.5. It is appropriate to state that a slightly more value-oriented path may be ahead for the stock in the near term as well.
Looking at the company’s sales, the company trades at a price-to-sales (P/S) ratio of 1.4, lower than the industry’s average of 3.4. Some prefer this metric over other value-focused ones because sales are harder to manipulate with accounting tricks than earnings.
The company’s Value Score of B shows that the company is undervalued compared with its industry peers. Thus, it is a good time to place a bet on the stock.
Louisiana-Pacific has a VGM Score of B. Our VGM Score identifies stocks that have the most attractive value, growth and momentum characteristics. In fact, our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 make solid investment choices.
Other Stocks to Consider
A few other top-ranked stocks in the construction space are Beazer Homes USA, Inc. BZH, Meritage Corporation MTH and Toll Brothers Inc. TOL.
Beazer Homes has a Zacks Rank #2 and is likely to witness a rise of 78.3% in earnings for the current quarter.
Meritage, also a Zacks Rank #2 stock, is expected to witness 38.7% growth in earnings this year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Toll Brothers, a Zacks Rank #2 stock, is expected to witness 40.1% growth in fiscal 2018 earnings.
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Louisiana-Pacific Corporation (LPX) : Free Stock Analysis Report
Toll Brothers Inc. (TOL) : Free Stock Analysis Report
Beazer Homes USA, Inc. (BZH) : Free Stock Analysis Report
Meritage Corporation (MTH) : Free Stock Analysis Report
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