Long Term Stocks

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Floor & Decor (FND) - >>> A niche, Buffett-backed home improvement retailer


https://www.fool.com/investing/2023/04/04/build-wealth-buy-these-growth-stocks/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article


Berkshire Hathaway's chairman and chief executive officer, Warren Buffett, loves businesses that possess an edge over their competitors. This is probably why his holding company owns a 4.5% position in the specialty home improvement retailer Floor & Decor (FND) worth almost $500 million.

Floor & Decor may not have the name recognition of its larger, more generalized counterparts like Home Depot and Lowe's. But nobody knows the hard-surface flooring space better than the under-the-radar retailer. With the average store coming in at around 79,000 square feet and offering about 4,400 tile, wood, laminate, vinyl, and natural stone flooring products, Floor & Decor can't be beat on product selection. And since the company sources its products straight from manufacturers, it passes savings on to customers with reasonable prices.

As you'd expect for a smaller company, Floor & Decor has yet to peak as a business. The company currently has fewer than 200 stores, which is far below its long-term target of 500 stores. Analysts believe that adjusted diluted EPS will increase at a rate of 13.8% annually through the next five years. That's drastically superior to the home improvement retail industry average earnings growth forecast of 4.1%.

Topping it off, the stock looks to be a bargain for its quality. Floor & Decor's forward P/E ratio of 28.8 is cheap compared to the home improvement retail industry average forward P/E ratio of 16.5. This is why I expect the stock to keep generating double-digit annual total returns for shareholders for at least the medium term.

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