While the S&P 500 is up 29.3% since April 2025, Floor And Decor (currently trading at $71.31 per share) has lagged behind, posting a return of 6.4%. This might have investors contemplating their next move.
Is there a buying opportunity in Floor And Decor, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free for active Edge members.
Why Is Floor And Decor Not Exciting?
We're sitting this one out for now. Here are three reasons why FND doesn't excite us and a stock we'd rather own.
1. Shrinking Same-Store Sales Indicate Waning Demand
Same-store sales is a key performance indicator used to measure organic growth at brick-and-mortar shops for at least a year.
Floor And Decor’s demand has been shrinking over the last two years as its same-store sales have averaged 6% annual declines.
2. Free Cash Flow Margin Dropping
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
As you can see below, Floor And Decor’s margin dropped by 3.2 percentage points over the last year. This decrease came from the higher costs associated with opening more stores.
3. Previous Growth Initiatives Haven’t Impressed
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
Floor And Decor historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 9.3%, somewhat low compared to the best consumer retail companies that consistently pump out 25%+.
Final Judgment
Floor And Decor’s business quality ultimately falls short of our standards. With its shares lagging the market recently, the stock trades at 37.7× forward P/E (or $71.31 per share). Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're fairly confident there are better investments elsewhere. We’d recommend looking at one of our top digital advertising picks.
Stocks We Like More Than Floor And Decor
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