This LQDT Stock Forecast article was written by Zhou He – Financial Analyst at I Know First.

Highlights

• Liquidity Services’ earnings per share jumped from $0.71 to $1.82 last year.
• The highest one is ROA of 24.15% better than 98.23% of companies in the industry.
• The stock price drops 20% in the last quarter.

Overview

Liquidity Services, Inc. (NYSE: LQDT) was founded in 1999. Liquidity Services, Inc. provides e-commerce solutions for managing, evaluating, and selling inventory and equipment for corporate and government customers. It operates through business segments such as GovDeals, Capital Assets Group (CAG), Retail Supply Chain Group (RSCG), and Machinio. The GovDeals feature provides self-service solutions that enable local and state agencies, including city, county, and state agencies, to sell and reclaim surplus assets through the company’s GovDeals marketplace. The CAG segment provides storage and self-service solutions for sellers, including marketplaces that allow commercial enterprises to sell surplus and idle assets. CAG also offers a full suite of services including revenue management, asset valuation, asset sales, and marketing. The RSCG segment comprises markets that enable companies in the United States and Canada to sell surplus goods and recover consumer goods and retail capital assets. Services also include returns management, asset recovery, and e-commerce services. The Machinio segment operates a global search engine platform for listing used equipment for sale in construction, machine tools, transport, printing, and agriculture.

Adjust the strategy to the economic environment

Many investors view liquidity services as a traditional buying strategy. Earnings per share for liquidity services have grown substantially over the past three years. Impressively, Liquidity Services’ earnings per share jumped from $0.71 to $1.82 last year. Year-over-year growth of 157% like this is rare.

Careful consideration of revenue growth and earnings before interest and EBIT margins can help understand the sustainability of near-term profit growth. EBIT margins for liquidity services were essentially unchanged last year, but the company reported a 13% increase in its revenue to $275 million. Liquidity Services’ earnings per share have been soaring, at an astonishingly high rate. For those interested, the bonus is that management holds a lot of stock, and the CEO’s compensation is relatively reasonable, illustrating good cash management. The strong earnings growth shows that the business is going from strength to strength. Hopefully, this trend will continue well in the future.

According to the form Q3-FY22 by LQDT, we can see RSCG has the highest revenue in these four segments. From what I understand, the RSCG division has expanded its footprint with a new distribution center in Kentucky and increased its ability to serve a more diverse set of retail buyers and sellers in the Midwest and South. So, it can be seen that this is an excellent strategy. GovDeals total revenue increased 49% compared to last year, driven by the post-acquisition growth of Bid4Assets in 2021 and continued adoption of the company’s digital marketplace solutions by government agencies, rather than traditional sales, for a wider range of assets, including Vehicles, heavy equipment, and real estate.

CAG’s GMV increased 13% due to higher sales in the heavy equipment and energy categories and in the EMEA region. Uncertainty in global supply chains, including the impact of COVID-19 and wars in other countries, is disrupting international trade and energy markets, and leading to macroeconomic trends such as inflation, rising interest rates, foreign exchange rate volatility, reduced consumer sentiment, and an increase in retailers’ inventory levels. These macroeconomic conditions may adjust the number, timing, and pricing of assets available for sale in any quarter.

The problem for LQDT right now may be that shareholders are down 46% this year. This will affect the judgment of investors. On the plus side, long-term shareholders have made money, with a gain of 16% annually for five years. The recent sell-off could be an opportunity, so it might be worth checking fundamental data for signs of a longer-term growth trend. The protection of the market is the investment of insiders, in fact, insiders have invested a considerable amount of wealth in it, currently worth $144 million. The holding represents 24% of the company’s business. This is what investors are willing to see and feel about the value of a security.

Let us look at LQDT performance across the Retail-Cyclical Industry. According to GuruFocus, LQDT is one of the most profitable companies in the industry. LQDT’s ROE of 48.58 is better than 94.52% of companies in the industry. The Net Margin of 23.53% is higher than 96.8% of companies in the industry. The highest one is ROA of 24.15% better than 98.23% of companies. The Operating Margin of 9.42% is higher than 76.91% of companies in the industry. The lowest one is the Revenue Growth Rate worse than 51.64% of companies in the industry.

Let’s look at the company credit test and financial positions.

The Altman Z-score, which determines the result of a credit test, stays near the bored of the Grey and Safe zones. At the same time, Piotroski F-score of 5 may indicate that the company’s financial situation is typical for a stable company.

The Yahoo Finance coverage for the company is performed by 3 analysts: 3 take the Hold position. The recommendation Rating is 1.5. The analysts’ community puts the average target price for the stock at $27 while it is traded at $16.26.

LQDT Stock Forecast: Conclusion

Although it may be worrying after seeing the stock price drop 20% in the last quarter. In the fact, the stock has risen 138% in recent years, which is very strong. If you’ve been following LQDT for a while but are hesitant to make the leap, I suggest you stay on the sidelines and research the stock further. On the other hand, if you are a risk-taker investor and looking for a stock that could provide a significant award in the future, LQDT is worthy of your attention.

It is worth paying attention that the stock-picking AI of I Know First has a high signal on the one-year market trend forecasts. The light green for the short-term forecasts is mildly bullish, while the darker green is a strong bullish signal for the one-year forecast.

Past Success with LQDT Stock Forecast

I Know First has been bearish on the LQDT stock forecast in the past. On November 18, 2021, the I Know First algorithm issued a forecast for LQDT stock price and recommended LQDT as one of the best consumer stocks to go short. The AI-driven LQDT stock prediction was successful on a 3-month time horizon resulting in more than 39.34%.

To subscribe today click here.

Please note-for trading decisions and use the most recent forecast.