La-Z-Boy (LZB): Valuation Check After Earnings Miss and Cautious Sales Guidance

If you’re watching La-Z-Boy (LZB) after earnings, you’re not alone. The company delivered first-quarter results that landed below Wall Street’s expectations, showing declines in both revenue and net income compared to the same period last year. Management attributed the softer numbers to fickle consumer demand and economic headwinds. They also laid out plans to grow through new store acquisitions in the Southeast. The company’s outlook for the next quarter is also muted, with sales guidance coming in lighter than expected. This suggests lingering caution around consumer willingness to spend on big-ticket items like furniture.

It has been a tough year for La-Z-Boy shareholders, and you can see it in the stock’s performance. Shares dropped by nearly a quarter in after-hours trading as investors processed the earnings miss and cautious guidance. Over the past year, the stock has slid about 9 percent, while momentum has faded more sharply in recent months. Despite these challenges, the company is investing to expand its retail footprint, signaling a longer-term bet on market share and brand strength, even as near-term demand remains choppy.

With the market punishing La-Z-Boy for its latest results, some investors may view the current share price as a discount, while others may see the recent drop as a reflection of concerns about slower growth ahead.

Most Popular Narrative: 10.8% Undervalued

According to community narrative, La-Z-Boy is viewed as undervalued based on future growth prospects and operational improvements.

"The multiyear transformation of La-Z-Boy's distribution network, which is reducing distribution centers from 15 to 3 centralized hubs, is expected to yield 50 to 75 basis points of wholesale margin improvement by Year 4. This will enhance long-term operating efficiency and net margins as supply chain costs decline."

Curious how La-Z-Boy’s margin overhaul and omnichannel initiatives might set the stage for a turnaround? The forecast depends on ambitious targets that only insiders know. Want to see the critical assumptions driving this price target? The growth and margin expansion that form the backbone of this undervaluation thesis may surprise you.

Result: Fair Value of $41 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent weak store traffic or prolonged margin pressure from new store openings could present challenges to La-Z-Boy’s ambitious expansion plans and slow the expected gains.

Find out about the key risks to this La-Z-Boy narrative.

Another View: Discounted Cash Flow Perspective

Interestingly, our DCF model tells a slightly different story. This approach suggests La-Z-Boy could be trading below its long-term intrinsic value, which may indicate potential hidden upside. Which method will prove more accurate?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out La-Z-Boy for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own La-Z-Boy Narrative

If you’re eager to take a closer look or have your own take on La-Z-Boy’s outlook, the platform lets you easily build your own version of the story in just a few minutes. do it your way.

A great starting point for your La-Z-Boy research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

Looking for More Smart Investing Ideas?

Don’t let opportunity pass you by when there’s a world of standout investments waiting for fresh eyes. Whether you want steady income, untapped tech stars, or dependable value, the Simply Wall Street Screener guides your next move. Sharpen your portfolio with ideas that go beyond the headlines—your next win could be just a click away.

• Boost your returns by tapping into dividend stocks with yields > 3% that put healthy income front and center for investors who love reliable yield.
• Catalyze your portfolio’s growth as you pursue AI penny stocks shaping the future of artificial intelligence and high-impact innovation.
• Spot emerging bargains with undervalued stocks based on cash flows primed to unlock the upside of strong cash flows at appealing prices.

Rewritten with em dashes replaced:

Looking for More Smart Investing Ideas?

Don’t let opportunity pass you by when there’s a world of standout investments waiting for fresh eyes. Whether you want steady income, untapped tech stars, or dependable value, the Simply Wall Street Screener guides your next move. Sharpen your portfolio with ideas that look beyond the headlines. Your next win could be just a click away.

• Boost your returns by tapping into dividend stocks with yields > 3% that put healthy income front and center for investors who love reliable yield.
• Catalyze your portfolio’s growth as you pursue AI penny stocks shaping the future of artificial intelligence and high-impact innovation.
• Spot emerging bargains with undervalued stocks based on cash flows primed to unlock the upside of strong cash flows at appealing prices.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com