LOVE – This Week’s Insider Buy

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Most of last week’s insider buys were made by institutions. Corporate executives didn’t give us much to choose from this week. Fortunately, there was one.

The Lovesac Company (LOVE) and Chairman of the Board Joe Kiani added another $1 million in LOVE shares last week at $144.79. It was his third buy since November 11, 2002, investing a little less than $6 million. (1)

Lovesac designs, manufactures, and sells furniture. It offers sactionals, such as seats and sides; sacs, including foam beanbag chairs; and accessories comprising drink holders, footsac blankets, decorative pillows, fitted seat tables, and ottomans.

As of January 30, 2022, the company operated 146 showrooms. It markets its products primarily through website, as well as showrooms at top tier malls, lifestyle centers, kiosks, mobile concierges, and street locations in 39 states of the United States.

Kiani is no stranger to buying and selling the consumer cyclical company’s stock. So far, the Chairman has been on the right side of the trade every time.

  • In 2008, he sold 560,000 shares between May and August, collecting more than $20 million between $34.60 and $40.03 per share.
  • In May 2009, he acquired 10,000 shares at $23.15.
  • He sold 22 months later at $33.08, banking more than $10 million at $33.08 per share.
  • The buyer came back between November 2011 and June 2012 with three purchases totaling close to $3 million from $18.28 and $20.24.
  • Then the Chairman went straight red mode, 45 uninterrupted sell tickets, more than 3.7 million shares, from $40.55 all the way to $300.98, adding more than $506 million to his bank account.

Now Kiani is back to being bullish on the heels of the company’s third quarter earnings results. Chief Executive Officer (CEO) said, “Despite this operating environment, we again delivered strong results against tough comparisons from a record set in Q3 last year,” adding, “Total net sales were 134.8 million, up 15.5% versus the prior year period. We delivered total comparable sales growth of 8.9% with broad based strength from both new and existing customers.” (2)

Wall Street expects continued success as earnings per share (EPS) are forecasted to rise to $2.46 in fiscal 2024 (next year) from $2.06 this year. Sales are slated to move higher by a little more than 10 percent next year to $695.66 million from $630.59 million in fiscal 2023 (this year). (3)

The furniture company is a little overpriced compared to its competitors on a price to earnings (P/E) basis and undervalued based on price to sales (P/S). LOVE trades at 9.67 times earnings versus 7.8 for its peers and 0.50 times sales against 1 times revenue for the industry.

If Lovesac trades at the industry average valuation for P/E and P/S, the stock would hit $19.19 or $45.78, respectively. If the furniture company maintains its current valuations, potential price points move to $23.79 and $22.90, based on P/E and P/S. Meanwhile, Wall Street has a one-year price target of $51.83.  The stock trades at $20.02 as we type and does not pay a dividend.

OVERALL:  The Lovesac Company (LOVE) appears to offer investors limited downside according to the industry average P/E ratio and analysts fiscal 2024 earnings forecast. LOVE could deliver solid returns using Wall Street’s price target or with 2024 sales projections and the peer groups typical P/S ratio.

LOVE is only appropriate for investors with super high-risk tolerance as there are only 15.19 million shares outstanding. Any heaving selling or buying would likely move the stock aggressively down or up, which is confirmed by the company’s beta of 2.44 compared to the S&P’s 1.


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