|Written by GSCR Staff|
|Wednesday, 31 December 2014 06:47|
If you read the latest edition of The Goldman Guide you no doubt pondered some of our thoughts on falling oil and gas prices.
We never thought we would see gas under $2 again, but it is here in a lot of places around the country. Again, proceed with some caution here, because as we stated, cheap gas is not necessarily great news for everyone. With that said, some consumer discretionary or similar companies and stocks could really benefit from prolonged relief from pain at the pump.
Our “slumber” stock is an appropriate winter seasonal play and the associated increase in the hours spent indoors. La-Z-Boy Incorporated (NYSE – LZB - $26.73) is a household name in furniture products, accessories, and case goods furniture products in the United States and Canada. Our theory here is that the consumer will no doubt look to finally get some new furniture this winter and companies like La-Z-Boy could serve as a direct beneficiary.
LZB looks great from a basic valuation perspective with a forward P/E of 16 versus a trailing P/E of 23 with a 5-year PEG of 1.15. The stock is currently trading above the 50, 100, and 200 day EMA. Outstanding gross margin of 35% and 7% operating margin versus current industry averages of “0” for both metrics show that the Company is maximizing price points and efficiency as well. Big numbers for the next few quarterly financial reports could drive accumulation in 2015. We think a price level of $30 by the end of spring is within reach.
Our “slopes” pick is a resort play for this winter. Peak Resorts, Inc. (NASDAQ – SKIS - $8.21) is an up and comer small cap play. The Company’s ski resorts include snow skiing, snowboarding, snow sports areas, golf course, hotel, and restaurant facilities. It operates 12 ski areas through the Midwest, Northeast, and Southeast United States.
Granted, the Company just went public last month and the stock has already seen the typical high in the first few days of trading with prices above $9, followed by a bottoming out under $7 a few weeks later. It appears a steadier accumulation phase has started over the past week or so.
We usually do not like feature stocks that have such short trading histories and SKIS is definitely more of a speculative play our typical Market Monitor picks. However, we think the consumer will take those vacations they have skipped over the last few years and companies like Peak Resorts could see a resultant spike in revenue. SKIS should get some pops as well if the Company beats expectations when it reports on 1Q15 financial results. We think a $10 target is possible by the end of 2Q15.
Have a great day and a Happy New Year!
Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.
This Market Monitor blog was prepared for informational purposes only. Goldman Small Cap Research, (a division of Two Triangle Consulting Group, LLC) produces research via two formats: Goldman Select Research, which typically highlights small cap companies, and Goldman Opportunity Research, which features micro cap companies in a sponsored research format. Thus, the Select product reflects the Firm’s internally generated stock ideas while the Opportunity product reflects sponsored research reports.
Goldman Small Cap Research is not affiliated in any way with Goldman Sachs & Co.
It is important to note that while we may track performance separately, we utilize the same coverage criteria in determining coverage of all stocks in both research formats. Please view the company’s individual disclosures for each engagement, which can be found in each company-specific report. All information contained in this blog, newsletter and in our reports were provided by the Companies or generated from our own due diligence. Our analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests, retain editorial control, and ensure independence. Analysts are compensated on a per report basis and not on the basis of his/her recommendations.
The information used and statements of fact made have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy. Goldman Small Cap Research did not make an independent investigation or inquiry as to the accuracy of any information provided by the Company, or other firms. Goldman Small Cap Research relied solely upon information provided by the Company through its filings, press releases, presentations, and through its own internal due diligence for accuracy and completeness. Such information and the opinions expressed are subject to change without notice. A Goldman Small Cap Research blog, report, note, or newsletter is not intended as an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed.
This blog does not take into account the investment objectives, financial situation, or particular needs of any particular person. This blog does not provide all information material to an investor’s decision about whether or not to make any investment. Any discussion of risks in this presentation is not a disclosure of all risks or a complete discussion of the risks mentioned. Neither Goldman Small Cap Research, nor its parent, is registered as a securities broker-dealer or an investment adviser with FINRA or with any state securities regulatory authority.
ALL INFORMATION IN THIS BLOG, REPORT OR NEWSLETTER IS PROVIDED “AS IS” WITHOUT WARRANTIES, EXPRESSED OR IMPLIED, OR REPRESENTATIONS OF ANY KIND. TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE FOR THE QUALITY, ACCURACY, COMPLETENESS, RELIABILITY OR TIMELINESS OF THIS INFORMATION, OR FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES THAT MAY ARISE OUT OF THE USE OF THIS INFORMATION BY YOU OR ANYONE ELSE (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOSS OF OPPORTUNITIES, TRADING LOSSES, AND DAMAGES THAT MAY RESULT FROM ANY INACCURACY OR INCOMPLETENESS OF THIS INFORMATION). TO THE FULLEST EXTENT PERMITTED BY LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE TO YOU OR ANYONE ELSE UNDER ANY TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY, PRODUCTS LIABILITY, OR OTHER THEORY WITH RESPECT TO THIS PRESENTATION OF INFORMATION.