What Do Floor & Decor’s Risk Factors Tell Investors?

Georgia-based Floor & Decor Holdings (FND) is a specialty retailer of flooring products. At the end of September 2021, it operated 153 warehouse stores across 33 states. It plans to open seven new stores before the year ends as the business continues to expand.

With this in mind, we used TipRanks to take a look at the latest financial performance and the risk factors for Floor & Decor. (See Insiders’ Hot Stocks on TipRanks)

Q3 Financial Results

Floor & Decor reported revenue of $876.6 million, exceeding the consensus estimate of $856.7 million. Revenue was $684.8 million in the same quarter last year. It posted adjusted EPS of $0.60 against $0.56 in the same quarter last year and beat the consensus estimate of $0.57. (See Floor & Decor Holdings stock charts on TipRanks).

Risk Factors

According to the new TipRanks Risk Factors tool, Floor & Decor’s main risk category is Finance and Corporate, which represents 33% of the total 58 risks identified for the stock. The company recently added one new risk factor under the Legal and Regulatory category, which accounts for 19% of its total risks.

Floor & Decor informs investors that the White House has proposed increasing the corporate tax rate and eliminating certain tax exemptions. The company warns that such changes to the tax law could increase its tax liability, which would in turn adversely affect its business and financial condition.

In addition to the tax risk, Floor & Decor also reminds investors of the risks associated with its debt. It tells investors in an updated Finance and Corporate risk factor that it ended Q3 with $206.6 million in an outstanding term loan. Additionally, it finished the quarter with $378.8 million in an unused asset-based credit facility. Floor & Decor cautions that it is subject to certain credit agreement restrictions that could make it vulnerable to unfavorable changes to general economic conditions. It further warns that dedicating substantial portions of its cash flow to servicing the debts could reduce the available cash to fund operations or invest in future growth.

Analysts’ Take

Berenberg Bank analyst Rudy Yang recently maintained a Buy rating on Floor & Decor stock with a price target of $153. Yang’s price target suggests 19.79% upside potential. Floor & Decor stock has gained about 38% year-to-date.

Consensus among analysts is a Strong Buy based on 10 Buys and 3 Holds. The average Floor & Decor Holdings price target of $151.08 implies 18.29% upside potential to current levels.

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