Should You Add Liquidity Services Inc. (LQDT) to Your Portfolio Amidst the E-commerce Boom?

Driven by rapidly expanding online marketplaces and modern marketing strategies by small and medium-sized businesses, the e-commerce boom can be experienced just by the sheer volume of recent sales data available. Additionally, personalized advertisements and AI-driven sales have contributed to this exceptional growth.

According to a report by the U.S. Census Bureau of the Department of Commerce, U.S. retail e-commerce sales for the third quarter of 2024 reached $300.1 billion, an increase of 2.6% from the second quarter of 2024. However, the more impressive part is that e-commerce sales accounted for 16.2% of the total sales for the quarter, indicating robust growth in the sector and widespread popularity among consumers.

Amid this booming environment, Liquidity Services, Inc. (LQDT) stands out as a prominent player in the e-commerce marketplaces, including auction listing tools and others. The company’s centralized marketplace that connects a global buyer base with assets from across the network of marketplaces has revolutionized its position.

The company’s growth is also evident in its stock performance. LQDT surged 62.9% over the past six months and 89.8% over the past year, closing the last trading session at $32.71.

Now, let us discuss the factors that could affect the stock’s growth trajectory.

Recent Developments

On February 3, LQDT announced the acquisition of Auction Software/Simple Auction Site, aimed at forming Liquidity Services Software Solutions, Inc, a new private-label and SaaS arm of the company.

The acquisition enhances the company’s penetration into the large and fragmented Circular Economy marketplace and offers its software development team’s capabilities to businesses, and global F500 corporations.

On January 28, Bid4Assets, a wholly owned subsidiary of LQDT announced a partnership with TheSheriffApp.com, a public safety app from OCV LLC. The partnership strengthens sheriffs’ efforts in prioritizing public safety and allows local auction participants to easily access data on available properties, enhancing accessibility and convenience.

Stable Historical Growth

LQDT’s performance is evident in its steady growth across key metrics. Over the past three years, revenue and EBITDA have grown at a CAGR of 15.6% and 2.3%, respectively, while operation income expanded at a marginal CAGR.

Moreover, the company’s tangible book value and total assets increased at a CAGR of 39.2% and 5.1%.

Sound Financials

For the fiscal 2025 first quarter that ended December 31, 2024, LQDT’s total revenue increased 71.5% year-over-year to $122.33 million. Its income from operations rose 330.3% from the year-ago value to $7.09 million.

Additionally, the company’s non-GAAP adjusted net income and non-GAAP adjusted earnings per common share grew 105.6% and 100% from the prior year’s quarter to $8.91 million and $0.28, respectively.

Optimistic Analyst Estimates

Analysts expect LQDT’s revenue and EPS for the fiscal 2025 second quarter ending in March to increase 36.9% and 11.1% year-over-year to $125.20 million and $0.30, respectively. In addition, the company exceeded the consensus revenue and EPS estimates in each of the four trailing quarters, which is impressive.

For the fiscal 2025 third quarter ending in June, LQDT’s revenue and EPS are expected to rise 29.3% and 10% from the prior year’s period to $121 million and $0.33, respectively.

Robust Profitability

LQDT’s trailing-12-month gross profit margin of 47.19% is 48.5% higher than the industry average of 31.78%. Its trailing-12-month levered FCF margin stands at 10.27%, 51.7% higher than the industry average of 6.77%.

In addition, the company boasts a trailing-12-month ROTC of 10.02%, which is 43.2% higher than the sector average of 7%. Also, the stock’s trailing-12-month asset turnover ratio of 1.35x is 72.4% higher than the industry average of 0.79x.

POWR Ratings Reflects Optimism

LQDT’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

LQDT has an A grade for Quality, in line with its higher-than-average profitability metrics. It also earned an A for Sentiment, driven by its optimistic analyst estimates. Moreover, the stock has a B for Growth, evident from its impressive growth history.

Within the Internet - Services industry, LQDT is ranked #3 out of 25 stocks. Beyond what is stated above, we have also given LQDT grades for Momentum, Value, and Stability. Get all LQDT ratings here.

Bottom Line

With the e-commerce industry showcasing robust growth prospects, LQDT’s leading position, backed by solid fundamentals and recent acquisitions and partnerships appears to be quite strong.

With sound financials, high profitability, optimistic analyst projections, and an impressive track record of growth, now may be an opportune time to consider adding LQDT to your portfolio.

How Does Liquidity Services, Inc. (LQDT) Stack Up Against Its Peers?

Although LQDT’s near-term outlook appears sound, it may be worthwhile to explore its industry peers, who exhibit even stronger POWR Ratings. So, consider these A (Strong Buy) and B (Buy) rated stocks from the Internet - Services industry:

Upwork Inc. (UPWK)

Similarweb Ltd. (SMWB)

8x8, Inc. (EGHT)

To explore more A or B-rated Internet - Services stocks, click here.

What To Do Next?

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LQDT shares were trading at $33.25 per share on Monday afternoon, up $0.54 (+1.65%). Year-to-date, LQDT has gained 2.97%, versus a 3.23% rise in the benchmark S&P 500 index during the same period.

Aritra is a financial journalist dedicated to breaking down complex financial topics into simple, actionable insights. Holding a Master’s degree in Economics, he uses his analytical expertise to help investors uncover unique opportunities for long-term success.

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