IPO Stocks to Sell Now: Floor & Decor Holdings (FND)
Can anyone say Lumber Liquidators Holdings Inc (NYSE:LL), the sequel? Right there on page 116 of the Floor & Decor Holdings Inc (NYSE:FND) prospectus is the name Lumber Liquidators, listed among 13 other retail companies, in a discussion about executive compensation.
The big difference between FND and LL is that Floor & Decor has been taken public by its private-equity owner while Lumber Liquidators was taken public back in 2007 by its founder Tom Sullivan along with a private equity minority partner. Regarding revenue, Floor & Decor is a much larger business with nearly three times as much on the top line as Lumber Liquidators at the time of their respective IPOs. However, in terms of operating income, their operating margins were identical at 6.5%.
Another big difference between the two IPOs is the level of debt before going public. Lumber Liquidators had net debt of $2.5 million compared to $386.9 million for Floor & Decor. Even worse, Floor & Decor paid out a $202.5 million special dividend in September 2016 as part of its refinancing; money that could have been used for debt repayment.
Floor & Decor will have no money from its IPO proceeds to grow its business while Lumber Liquidators had almost $25 million available for growth purposes.
Up 81.5% since its April IPO through July 11, Floor & Decor is trading at 85 times its 2016 earnings per share of 45 cents. I don’t care how great a retailer it is; it’s just an insane valuation.