Want To Invest In Floor & Decor Holdings, Inc. (NYSE:FND) Today? Read This First

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Floor & Decor Holdings, Inc. (NYSE:FND) is a stock well-positioned for future growth, but many investors are wondering whether its last closing price of $41.46 is based on unrealistic expectations. Let’s look into this by assessing FND’s expected growth over the next few years.

See our latest analysis for Floor & Decor Holdings

How is FND going to perform in the future?

Floor & Decor Holdings is poised for significantly high earnings growth in the near future. Expectations from 17 analysts are extremely bullish with earnings forecasted to rise significantly from today’s level of $1.182 to $1.571 over the next three years. This indicates an estimated earnings growth rate of 19% per year, on average, which indicates an exceedlingly positive future in the near term.

Is FND’s share price justified by its earnings growth?

FND is trading at quite a high price-to-earnings (PE) ratio of 35.06x. This tells us that Floor & Decor Holdings is overvalued compared to the US market average ratio of 17.87x , and overvalued based on current earnings compared to the Specialty Retail industry average of 14.94x .

NYSE:FND Price Estimation Relative to Market, June 23rd 2019
NYSE:FND Price Estimation Relative to Market, June 23rd 2019

We already know that FND appears to be overvalued when compared to its industry average. But, seeing as Floor & Decor Holdings is perceived as a high-growth stock, we must also account for its earnings growth, which is captured in the PEG ratio. A PE ratio of 35.06x and expected year-on-year earnings growth of 19% give Floor & Decor Holdings a higher PEG ratio of 1.84x. This tells us that when we include its growth in our analysis Floor & Decor Holdings’s stock can be considered a bit overvalued , based on the fundamentals.

What this means for you:

FND’s current overvaluation could signal a potential selling opportunity to reduce your exposure to the stock, or it you’re a potential investor, now may not be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I urge you to complete your research by taking a look at the following:

  1. Financial Health: Are FND’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  2. Past Track Record: Has FND been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of FND’s historicals for more clarity.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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. Thank you for reading.