American Woodmark: A Strong Buy - Analyst Blog
December 17 2012 - 12:24PM
Zacks
A solid year-to-date return of 85.8%, robust second-quarter
fiscal 2013 results and rising estimates aided American
Woodmark Corporation (AMWD) to attain a Zacks #1 Rank
(Strong Buy) on November 21, 2012. This manufacturer and
distributor of cabinets and vanities outperformed the Zacks
Consensus Estimates in 5 out of 8 quarters. The company has topped
estimates by an average of 55.4% over the last 8 quarters.
The Rank Drivers
Improvement in new home construction activities and the
company’s sturdy financial results coupled with earnings momentum
are the rank drivers for this stock.
On November 20, American Woodmark posted second-quarter fiscal
2013 earnings of 14 cents a share. The quarterly earnings not only
surpassed the Zacks Consensus Estimate of 5 cents by 180%, but
significantly rebounded from a loss of 21 cents delivered in the
year-ago quarter. Results benefited primarily from top-line
growth.
Net sales increased 24% from the year-ago quarter to $159.8
million, driven mostly by over 40% sales growth in the new home
construction business. Total revenue also came ahead of the Zacks
Consensus Estimate of $140 million. The company distributes its
products through two sales channels: Home Center and New
Construction.
Gross profit margin expanded 300 basis points to 15.5% on the
back of rise in sales volume and lower fixed overhead expenses.
Soaring Earnings Momentum
The Zacks Consensus Estimate for fiscal 2013 has moved up by
58.3% to 38 cents over the last 30 days, suggesting a
year-over-year increase of 150.3%. For fiscal 2014, the Zacks
Consensus Estimate jumped 25.6% to 98 cents over the same time
frame, representing a year-over-year surge of 155.2%.
Valuation
American Woodmark currently trades at a forward P/E of 67.72x,
reflecting a 229.4% premium to the peer group average of 20.56x.
Also, on a price-to-book basis, the shares trade at 2.78x, a
substantial premium to the peer group average of 1.02x. Again, its
price-to-sales ratio of 0.67 is at a premium to the peer group
average of 0.44. Given the company's strong fundamentals, the
premium valuation is justified.
Company Description
Founded in 1980 and headquartered in Winchester, Virginia,
American Woodmark Corporation manufactures and distributes kitchen
cabinets and vanities for the remodeling and new home construction
markets. The company’s leading brands include American Woodmark,
Timberlake, Shenandoah Cabinetry, Potomac and Waypoint Living
Spaces. The company, which primarily competes against Masco
Corporation (MAS), has a market cap of $376.1 million.
AMER WOODMARK (AMWD): Free Stock Analysis Report
MASCO (MAS): Free Stock Analysis Report
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