FLWS-US
Overall Grade: B+
While everyone’s out buying flowers for their loved ones this Valentine's day, CressCap has highlighted the digital flower company as a buy. The CressCap computer analysis employs a multi-factor quant model which seeks well-balanced fundamentals. The model identifies potential buy ideas using the collective traits of value, growth, strong EPS revisions, profitability and momentum. All of these characteristics are measured and ranked on a sector relative basis with academic letter grades (A-F). The CressCap computer driven analysis of these core metrics has allowed the model to identify 1-800-Flowers.com as a buy with potential for alpha.
CressCap’s Valentine's day pick is appropriately timed since February and March are unsurprisingly ideal months for buying 1-800-Flowers.com stock. In the past 10 years, February and March have been strong trading months for FLWS, with an average March price increase of 13.69% and positive stock returns for nine of the last ten years in March. According to the company's CEO, Jim McMann, “obsessed with providing a a terrific (customer) experience". This undoubtedly is a mentality that seems to be working in the company's favor as FLWS quickly gains market share and continues to develop partnerships with smaller brands to expand their gifting services.
Another upside, the stock is trading cheaper than the flowers you are likely to buy today. Our value metrics have this stock marked as cheap and suggest that it is a good value, with solid fundamental value metrics across the board. The company boasts a sector relative price to sales ratio that is graded A- and an EV/EBITDA FY1 grade of A. In addition to good value and growth metrics, EPS revision metrics are also favorable with an A grade. We also like the positive return on equity growth trend over the last three years.
The most enticing part of this flower stock is the buy opportunity resulting from the disconnect between positive EPS revisions and the negative trend in the company's stock price. EPS revisions have turned positive while the stock price has been trending down over the month. There is a disconnect between the positive sentiment by analysts and the general ‘Sell Off’ trend of the market over the last month. This presents a good opportunity to acquire the stock when it is down on market sentiment but maintains its strong fundamentals. You can't go wrong with flowers on Valentine’s Day, this year that age-old traditions applies to the 1-800-Flowers stock as well.
Written By: Steven Cress (steven.cress@cresscap.com) and Tela Wittig (tela.wittig@cresscap.com)
For additional information, feel free to send questions to info@cresscap.com or view our website www.cresscap.com. Please click here to view CressCap Investment Research’s full disclaimer.
