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A look at Leslie’s Risk Factors
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A look at Leslie’s Risk Factors

Leslie’s, Inc. (LESL) is a direct-to-consumer pool and spa care brand in the U.S. It markets its products through 940 physical locations and multiple digital platforms, which cater to residential, professional and commercial customers.

Recently, the company delivered better-than-expected Q3 numbers on both top line and bottom line fronts.

Let’s take a look at Leslie’s financial performance and see what has changed in its key risk factors that investors should be aware of.

Leslie’s Q3 revenue surged 24.3% year-over-year to $596.5 million, beating analysts’ estimates of $570.4 million. Comparable sales growth during this period was 23.9%.

The CEO of Leslie’s, Mike Egeck, said, “We delivered a record third-quarter marking the largest sales, gross profit, and EBITDA quarter in our history… As we look ahead, we remain encouraged by consumer demand and the momentum we are seeing across our growth initiatives, both of which position us well for the remainder of the year and beyond.”

An expansion in gross margin to 47.6% versus 43.9% a year ago has offset an 18.2% year-over-year increase in selling, general and administrative (SG&A) expenses of the company. Earnings per share jumped to $0.64 versus $0.47 a year ago, beating consensus by $0.09. (See Leslie’s stock chart on TipRanks)

Additionally, Leslie’s has raised its Fiscal Year 2021 outlook. The company estimates 2021 sales of $1.31 billion, adjusted EBITDA of $265 million, and earnings per share of $0.83 at the midpoint of the guidance ranges.

On August 5, Jefferies analyst Jonathan Matuszewski assigned a Buy rating to the stock but lowered the price target to $39 from $41. Matuszewski sees nine consecutive quarters of positive comparables and the fourth raise in annual guidance as key positives.

Further, the analyst expects two potential bolt-on M&A transactions in the fourth quarter.

Based on 5 Buys and 2 Holds, consensus on the Street is a Moderate Buy. The average Leslie’s price target of $34.29 implies 36.9% upside potential. Shares are up 14% since the company’s listing in October 2020.

Now, let’s look at what has changed in the company’s key risk factors.

According to the new Tipranks’ Risk Factors tool, Leslie’s main risk category is Finance & Corporate, which accounts for 43% of the total 44 risks identified. Since July, the company has changed one key risk factor.

Under the Finance & Corporate category, the company highlights that future sales of its shares by existing investors could impact the stock price negatively.

The company states that its directors, executive officers, and selling stockholders in the offering have entered into lock-up agreements. Although the lock-up period expired on August 8, some of its stockholders have lock-up agreements, which would expire in September 2021 and October 2022. Upon the expiration of each of these lock-up periods, all such shares can be resold in the public markets. The price of Leslie’s common shares can be affected if any of these significant stockholders sell or indicate an intention to sell large amounts of the company’s stock.

The Finance & Corporate risk factor’s sector average is at 36.2%, compared to Leslie’s 43%.

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