Lumber Liquidators (LL) Stock Skyrockets: Here’s why!

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Lumber Liquidators Holdings Inc (NYSE: LL)

Lumber Liquidators is having an incredible day in the market today, and for good reason. The company has announced that it has settled a crucial case, exciting investors. Today, we’ll talk about the case that was settled, how the market reacted to the news, and what we can expect to see from LL moving forward. So, let’s get right to it…

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LL Settles CPSC Case

As mentioned above, Lumber Liquidators is having an incredible time in the market today after announcing that it has settled a key case. The case against the company was filed by the Consumer Product Safety Commission, also known as CPSC. The case in question revolved around laminate flooring that was made in China, and a big concern among investors was that LL would be forced to recall this flooring. Of course, a recall would cost the company a massive amount of money.

The issues for LL started more than a year ago. This was when the popular television show 60 Minutes reported that laminate flooring products sold by Lumber Liquidators contained excessively high levels of formaldehyde. However, the company was able to avoid a recall by agreeing that it would no longer sell the products, including its existing inventory of the laminate flooring in question. Also, LL agreed to continue to test the homes of consumers who had previously purchased the product. In a statement, the CPSC made it clear that the flooring that is currently installed in homes should not be of concern. Here’s what they had to say:

Today’s announcement is not intended to cause consumers to pull up Chinese-made laminate flooring installed in their home…”

How The Market Reacted To The News

As investors, we know that the news moves the market. When positive news is released with regard to a publicly-traded company, we can expect to see gains in the value of the company’s stock as a result. Adversely, when negative news is released, we can expect to see declines. The news that was released today surrounding Lumber Liquidators was overwhelmingly positive. After all, investors have been fearful that the company would have to recall products that were sold to the masses, which would cost a massive amount of money. Because the case was settled, investors are excited, leading to gains in the value of the stock. Currently (10:35), LL is trading at $15.61 per share after a gain of $2.38 per share, or 17.99%, thus far today.

What We Can Expect To See Moving Forward

Moving forward, I have a relatively mixed opinion with regard to what we can expect to see from Lumber Liquidators. While the news that was released was positive and will likely lead to short-run gains, the long-run view on the stock simply doesn’t seem so positive. Currently, the company is dealing with several issues, including weak operating cash flow, poor profit margins, horrible return on equity, and, with these combined, deteriorating net income. The bottom line is that, financially, LL simply isn’t doing well. This could lead to declines in the stock moving forward.

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What Do You Think?

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