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BMO Capital Markets initiated coverage of Floor & Decor Holdings, Inc. (NYSE:FND) at Market Perform, as it believes its valuation reflects strong growth prospects. Therefore, the firm said it is awaiting a potential better entry point, probably around $33.
The firm has a $41 price target on the shares of the company.
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Analyst Wayne Hood believes a pullback toward the entry point he envisages could emerge from a group or market correction or hurricane trade unwinding. The analyst thinks an investor sentiment shift, lumpy quarterly earnings per share growth due to unbalanced store opening, a secondary offering or a possible disruption caused by transitioning distribution centers into 2018 could also drag the stock.
That said, BMO Capital Markets sees Floor & Decor as operating a proven, differentiated business model, grounded by a seasoned leadership team and board. This, according to the firm, has helped build a solid foundation for strong same sales growth, which is estimated at 11.4 percent in 2017.
"Our research supports target of 400 stores U.S. stores and 20% annual store growth, leaving us seeing a 25% five-year EPS growth rate," the firm said. The growth is above the best-in-class average of 14.6 percent.
The firm feels a premium valuation for Floor & Décor is justified due to above-average same-store sales growth, visibility into 20 percent unit growth, more favorable timing of new site potential, emerging lower secondary market rent rates, upside to EBIT margin rate, improvement in cash flow generation, balance sheet deleverage, least relative e-commerce threat and the seasoned leadership.
See also: Physical Retail Isn't Dying: Here's How To Play ItCrypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.