LOVE - Lovesac: Faltering Growth Offset By Margin Upside

2024-05-07 01:44:30 ET

Summary

• Lovesac's stock has fallen 10% year to date, but its solid earnings and valuation support protect it from substantial downside.
• The company's top-line growth has decelerated sharply, but its expanding gross margins help offset the slowdown.
• With a modest valuation, high-margin products, and an expanding showroom presence, there is justification for a small investment in Lovesac.

Amid shaky market conditions, when investing in small and mid-cap stocks it's best to lean in companies that have already demonstrated strong profitability and improving margins. And though this sometimes means eschewing more exciting growth stories, companies with solid earnings and valuation support are protected from substantial downside in case the broader market goes south....

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