Floor & Decor Stock Looks Like a Good Pick for Bears

FND options are looking affordable right now

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Floor & Decor Holdings, Inc. (NYSE:FND) is a multi-channel specialty retailer and commercial flooring distributor. The retailer operates 153 warehouse-format stores and two design studios in the United States. FND offers a broad assortment of in-stock hard-surface flooring, including tile, wood, laminate, vinyl, and natural stone along with decorative and installation accessories. This afternoon, FND is trading down 1.8% at $129.21.

Floor & Decor stock has increased about 48% year-over-year and has tacked on 59% since dropping to its 52-week low of $81.20 in early March. Additionally, shares of FND have grown 30% year-to-date, but have shed 11% since hitting its all-time peak of $145.89 on Nov. 4.

From a fundamental point of view, Floor & Decor stock is priced very richly with a market cap of $13.9 billion. At its current valuation, FND's price-earnings ratio comes in at an inflated 47.76 and its price-sales ratio comes in at a relatively high 4.35. In addition, FND has a forward price-earnings ratio of 44.64, which signals an expected growth in earnings while still being extremely high for a company in the retail sector. Floor & Decor also has $330 million in cash and $1.4 billion in total debt on their balance sheet, which could hinder its long-term potential growth rate.

Overall, the biggest concern with Floor & Decor stock lies is its valuation, but  FND could still potentially be a long-term winner. Nonetheless, investors will likely want to see Floor & Decor stock drop fairly substantially in price before buying shares any time soon. Plus, there looks to be room for downgrades, with 12 of the 14 analysts in coverage sporting a "strong buy" recommendation. 

Regardless, FND looks like an affordable pick of options traders. This is per the equity's Schaeffer's Volatility Index (SVI) of 40% sits higher than just 35% of readings from the last 12 months. This means options players are pricing in low volatility expectations for the equity right now.

 

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