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Battleground Stock: Lumber Liquidators

In the stock market, the constant tug-of-war between bulls and bears can be a truly vicious battle. There is perhaps no better symbol for this than what’s going on right now for Lumber Liquidators (LL). Lumber Liquidator’s problems started when ’60 Minutes’ aired a segment indicating that the company may be illegally sourcing wood. Since the report, shares are down by more than half.

This casts doubt on the major bull case behind the stock’s amazing rally over the past several years, which were the company’s superior fundamentals. Shares soared from $15 in 2011 to over $110 two years later. This was based on Lumber Liquidator’s huge revenue growth and simultaneous margin expansion, which caused profits to skyrocket. Unfortunately, this is a very rare combination that is almost impossible to accomplish. In this case, it seems that Lumber Liquidator’s astonishing growth was too good to be true.