Floor & Decor: strong business trends and growth potential


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Even though Floor and Decor (NYSE: FND) are down 46% year-to-date, in my opinion not a bad time to go long. First, the company demonstrated that it could pass on high inflation at the end consumer. Second, thanks to rising product prices and effective cost management, the company is showing strong trends in operating margins. Also, I think the company is trading below fair trade.


Gross margin forecast: I believe the company will be able to maintain its gross margin at a stable level over the next few quarters, then I expect a gradual recovery to healthy levels.

Despite the fact that the company detects a drop in footfall, we see that sales in the same store are in a positive observation zone, namely that:

1) the business is able to pass on increased costs to the end consumer

2) the company’s consumer less sensitive to price increases than other sectors

Company presentation

Company presentation

Sales and Store Operations: In my view, the level of expenses (% of sales) will remain at historical levels, as the company has already increased wages given the increased competition for labor. The growth of the average check allows it to more effectively control the level of expenditure.

Quarterly projections

Personal calculations

Personal calculations

Annual projections

Personal calculations

Personal calculations


To value a company, I prefer to use the DCF model and calculate multiples because:

1) The company has a long reporting history, so I can look up past periods and make assumptions based on historical data

2) The business of the company is stable, so it is easier to make assumptions about future growth rates

3) Based on historical data, macro data and management forecasts, I can make assumptions about cost growth and profitability

WACC: 10.7%

Terminal growth rate: 3%

Personal calculations

Personal calculations


Personal calculations

Personal calculations


Macros: Lower inflation and a pick-up in consumer confidence will support consumer spending and support business revenue over the next few periods.

Growth: growth in traffic and average check, as well as the successful opening of new stores, can also have a positive impact on the company’s revenue growth rate.

Margin: effective cost control can help a business maintain operating margins.


Macros: Continued monetary policy tightening, lower consumer confidence and lower real incomes could negatively impact revenue growth due to lower consumer spending in the discretionary segment.

Margin: rising prices for raw materials, commodities, energy and transportation may lead to a decline in the company’s operating profitability

COVID: the return of the COVID pandemic could negatively impact operations as further restrictions could disrupt supply chains


The company continues to successfully pass on price increases to the end consumer, supporting the company’s operating and financial results in the face of pressure on consumer discretionary spending. In addition, effective cost management helps maintain operational profitability. I think the company is currently trading below fair value and my target price is $79 (upside potential is 14%).


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