Lovesac Is An Attractive Investment At The Moment, According to Experts 

December 28, 2022  by HFBusiness Staff in Business Strategy, Industry   

We're heading into a new year, and the starting line is kind for many of the market's promising growth stocks after a challenging 2022.

Not every investment will bounce back, but some potential buys are attractively priced at the moment. Choose wisely and your stocks could more than triple in the next 10 years.

Lovesac (LOVE -0.93%) has a compelling current price tag and promising long-term growth prospect to move sharply higher in the coming years. Let's see why this stock that can pop at least threefold over the next decade.

The furniture market has cooled off in recent quarters. We're no longer spending as much time in our homes as we did during lockdown. Rising mortgage rates have also cooled the housing sector, meaning fewer new digs to outfit with fresh furnishings.

The leading online furniture retailer has posted six consecutive quarters of negative revenue growth. Losses are mounting, as it's burned through $1 billion over the past year alone.

You wouldn't expect any furniture or home furnishings specialist to still be growing its top line in this environment, but Lovesac still managed to deliver 16% year-over-year growth for its latest quarter.

It's a far cry from the 17 straight quarters of better-than-25% gains in net sales before that, but it's still a double-digit increase at a time when others are going the wrong way. Gaining market share -- even when it's a matter of a thickening slice of a shrinking pie -- is always commendable.

Lovesac has two flagship products. It's a major player in the premium beanbag chair market. Its beanbags come with plush washable covers and are available in a wide range of sizes, from the conventional beanbags for one to some large enough to fit couples or an entire young family.

Lovesac also has a bigger-ticket line of sectionals that it calls "sactionals." The modular pieces can be arranged in a wide range of configurations, and audiophiles can even have speakers inserted to create the ultimate home theater or stereo experience.

An important point here is that Lovesac is highly profitable. It's also cheap, trading for 10 times trailing earnings and 8 times next year's analyst target. Lovesac is going through some near-term challenges.

Net sales growth will continue to decelerate, and Wall Street has lowered its near-term expectations for both ends of the income statement. Margins are getting squeezed as rising inflationary pressures are colliding with a need for promotional activity to clear out inventory.

It's not perfect, but you can't spell Lovesac without love, and right now it's hard not to love the attractive valuation for a stock that has history of growing a lot faster than its current earnings multiple.