Why investors should make room in their portfolios for this small-cap stock
Lovesac Co (NASDAQ:LOVE) is a technology-driven furniture company based in Stamford, Connecticut. While its stock has seen a more than 45% drop this year, it looks like shares are making a rebound, adding 6.6% during Wednesday's session, and looking at another 4.1% jump today, last seen trading at $37.95. For the quarter, LOVE is up more than 32%. Traders should watch the $38 area, however, as it's worked as a consolidation level since the stock's plummet to its annual lows near the $26 mark in mid May.
Despite its recent rebound, shorts have been piling on, rising 13.5% in the last reporting period to make up 17.8% of the stock's available float. Short-term options traders have taken a similarly bearish stance. This is per LOVE's Schaeffer's put/call open interest ratio (SOIR) of 1.46, which stands higher than 89% of readings from the past 12 months. In other words, these players have rarely been more put-biased.
Analysts have remained incredibly bullish, though. All six covering the stock call it a "strong buy." Plus, the 12-month consensus price target of $89.83 is a 146.4% premium to Wednesday's close.
An even closer look shows that Lovesac stock continues to offer an attractive valuation at a forward price-earnings ratio of 12.09 and a price-sales ratio of 1.01. The furniture company has also maintained an incredibly consistent growth rate over multiple years, with estimates for the coming years indicating substantial growth as well. For fiscal 2022, LOVE reported a 55.3% increase in revenues and a 211.7% increase in net income.
LOVE has experienced 228.4% annual revenue growth since fiscal 2019 and has managed to increase its net income by more than $80 million since reporting $34.5 million in net losses for fiscal 2019. Furthermore, the furniture name is expected to grow revenues and earnings 25.9% and 2.1%, respectively, for fiscal 2023. LOVE is also estimated to see a 22.4% increase in revenues and a 40.1% increase in earnings for fiscal 2024. Overall, Lovesac is fundamentally one of the safest small-cap stocks with a high growth rate.