Recommendation: Speculative Buy
| Entry Date | Symbol | Recommendation | Entry Price (CAD) | Target 1 (CAD) | Target 2 (CAD) | Holding Duration | Potential Upside* |
|---|---|---|---|---|---|---|---|
| 22 Oct, 24 | LNF | Speculative Buy | CAD 29.74 | CAD 33.011 | CAD 35.322 | Same day | 18.8% |
*Potential Upside (%) indicates the expected percentage increase from the Entry Price to the Target 2 Price.
Data Powered by EOD Historical Data (“EODHD”).
Leon's Furniture Limited, together with its subsidiaries, operates as a retailer of home furnishings, mattresses, appliances, and electronics in Canada. It operates in two segments, Leon's and The Brick. The company provides repair services for household furniture, electronics, and appliances; home office products; warranties; and credit insurance products, including life, dismemberment, disability, critical illness, and involuntary unemployment. It also operates as a commercial retailer of appliances to builders, developers, renovators, property management companies, hotels, extended care industries, landlords, government bodies, and insurance companies; and engages in the franchise operations. The company sells its products through a network of retail stores under the Leon's, The Brick, The Brick Outlet, and The Brick Mattress Store banners; and the Brick's Midnorthern Appliance and Appliance Canada banners, as well as through its websites, including leons.ca, thebrick.com, furniture.ca, midnorthern.com, transglobalservices.com, and applicancecanada.com. The company was formerly known as Ablan Leon Distributors Limited and changed its name to Leon's Furniture Limited in June 1969. Leon's Furniture Limited was founded in 1909 and is headquartered in Toronto, Canada.
Higher Revenue: CAD 617.6 mn in Q2 2024 vs CAD 593.8 mn in Q2 2023
Higher Net Income: CAD 30.1 mn in Q2 2024 vs CAD 27.4 mn in Q2 2023
Lower Cash: CAD 56.8 mn in Q2 2024 vs CAD 64.8 mn in Q2 2023
Higher Long term debt: CAD 102.5 mn in Q2 2024 vs CAD 92.5 mn in Q4 2023
Sensitivity to general economic conditions, changes in customer taste, fall in same store sales, etc.
| Entry Price | Support* | Target 1 | Target 2 |
|---|---|---|---|
| 29.74 | 24.85 | 33.011 | 35.322 |
Data Source: REFINITIV, Analysis: StockNextt
*Support can be considered as an indicative stop-loss, and if prices move below that level on closing basis individuals may evaluate exiting the position depending on their risk appetite, previous holdings, and other factors considered. The support and resistance levels may need to be re-evaluated within 4-6 weeks’ time frame depending on the stock price movements from the date of recommendation on the stock.
Investing in digital innovation: The organization prioritizes cost-effective management and continuous digital innovation. Furthermore, the company believes it will attract more customers to its online eCommerce sites and 303 store locations across Canada, which is a huge advantage.
Gaining momentum on sequential basis: The company is gaining traction sequentially, with key financial figures such as Total system-wide sales and franchise sales improving in Q2 2024 compared to Q1 2024. Total system-wide sales increased in Q2 2024 to CAD 742.1 million from CAD 677.7 million in Q1 2024, while franchise sales increased to CAD 124.4 million from CAD 115.4 million in Q1 2024. Despite a difficult macroeconomic and customer environment, the company was able to report higher numbers.
An income play: The dividend pay-out practice translates into an essential factor for regular income-seeking investors with a long-term horizon. Recently, the Company increased the quarterly dividend by 11.1% and paid a monthly cash distribution of CAD 0.20 per common share, on 7th October 2024. Moreover, at the last closing price of CAD 29.74 as on October 21, 2024, the stock offered a healthy dividend yield of 2.75%, which looks decent considering the current macros and interest rates.
Considering the expected valuation upside, healthy revenue and net income and investing in digita innovations, decent liquidity, current trading levels and key business risks a ‘Speculative Buy’ recommendation has been given on the stock at the last closing price of CAD 29.74, as on October 21, 2023.
Data Powered by EOD Historical Data (“EODHD”).
Sector: Consumer Cyclical Industry: Specialty Retail
| Company | Change (CAD) | Price (CAD) | Trailing PE (x) | Forward PE (x) | Price Sales TTM (x) | Price to Book Value (x) | Enterprise Value to Revenue (x) | Enterprise Value to EBITDA (x) |
|---|---|---|---|---|---|---|---|---|
| LNF Leon's Furniture Limited |
0.26 1.10% | 23.90 | 13.29 | 12.38 | 0.69 | 1.60 | 0.76 | 6.22 |
| ATD Alimentation Couchen Tard Inc A |
0.73 1.03% | 71.70 | 19.85 | 18.59 | 1.02 | 3.79 | 0.90 | 11.11 |
| CTC Canadian Tire Corporation Limited |
- -% | 208.51 | 19.64 | 17.06 | 0.54 | 2.22 | 1.03 | 8.97 |
| PET Pet Valu Holdings Ltd |
0.34 1.28% | 26.83 | 21.84 | 16.26 | 1.73 | 18.24 | 2.38 | 11.23 |
| GBT BMTC Group Inc |
- -% | 11.50 | 15.49 | 10.28 | 0.75 | 0.90 | 0.78 | 46.45 |
Data Powered by EOD Historical Data (“EODHD”).
Markets are trading in a highly volatile zone currently due to certain macroeconomic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is October 21, 2024. The reference data in this report has been partly sourced from REFINITIV.
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Target: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Target 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Target 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
Disclaimer :
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