F&D exemplifies ‘Move on while you’re still ahead’ concept
Recently the home floor seller Floor and Décor (Pending: FND) announced that it would be holding a $150 million IPO on the NYSE market. Floor and Decor is going to sell 8.82 million of its Class-A Common stock shares within a range of $16-$18 per share,. Post-IPO, you’ll be thinking of floor and Decor as a $1.5 billion company.
The Georgia-based hardwood floor retailer was founded in 2000 by George West. West acted as its CEO from inception until 2012, when Thomas Taylor took over. With a lot of experience in the DIY industry, Taylor grew Floor and Decor into a 72-store firm. He also guided the company as it expanded into 17 states in the US. Of course, he had some help from the company’s strong management. Not to mention corporations like Ares Corporation and FS Equity Partners, which funded the growth of Floor and Decor in exchange for a stake.
F&D had a good year in 2016. Make no mistake, Floor and Decor is still a mid-level company. However, the company did so well last year that it started catching up with its more highly evaluated competitors like Home Depot.
If you look at Floor and Decor’s finances from 2012, you’ll see that F&D has been growing steadily for the past half decade. Almost each year after 2012, F&D’s overall gross has increased. If the trend keeps up, Floor and Decor will hit the 33% CAGR mark at the end of the fourth quarter of 2017. These growth prospects will be even better by the firm’s imminent IPO which will see its sales/price ratio rise from its current 1.5x level.
Additionally, F&D has promisingly good control of its gross profit margins, totaling at around 40%. This is good news for anybody who is looking to invest in the company because it indicates viable sales (about $1 billion as of December 31st, 2016) and market control. The margins the company is making also indicate that its liquid assets are at a favorable point, with adequate cash flow from operations. Such cash flow will allow you to earn your money back from the company and fast.
The fact that the company is financially stable and set to improve economically in the coming months makes it an attractive investment prospect for any investor in the market. The IPO that the company filed with the SEC is therefore set to be a success, with many speculating that F&D shares will go for the price at the high end of the set range.
F&D stated that the proceeds from the IPO would go to the payment of part of the firm’s outstanding Term Loans. After Floor and Decor pays that debt it will still have an outstanding compounded debt of $300 million in loans and interest. Wells Fargo Securities and GCI Capital Market LLC are the main creditors of the F&D. Taylor also remarked that F&D would use the funds from the IPO to expand and move toward the company’s goal of having 400 stores.
Floor and Décor is not the only home-service retailer to ‘move on while it was still ahead’ in the market. In the ‘80s and’90s, Home Depot used the stock-splitting technique to increase its revenue whenever share value hit $50 or ran to the triple digits.