Why Shares of Lumber Liquidators Holdings, Inc. Popped 13% in February

By Travis Hoium Markets Fool.com

What happened

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Shares of flooring retailer Lumber Liquidators Holdings, Inc. (NYSE: LL) rose 13.2% in February, according to data provided by S&P Global Market Intelligence, after reporting a quarter that gave investors hope the future is getting brighter.

So what

Fourth-quarter 2016 revenue was up 4.3% versus a year ago to $245 million, and gross margin improved from 23% to 32.9% over the same time frame. Lumber Liquidators still lost $5.5 million, or $0.20 per share, in the quarter, but results are at least trending upward rather than downward after health and safety concerns and scandal plagued the last two years.

Image source: Getty Images.

While this may not be a sure sign that Lumber Liquidators has a profitable future ahead, it's a sign the company is past the worst of the financial impact from those scandals. Now, management has a tough road ahead regaining its reputation and growing sales organically, which could take a very long time.

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Now what

While investors were excited that financial results are improving, we have to keep in mind that Lumber Liquidators is still losing money and still has a lot of baggage going forward. I'm not yet convinced that the company will be able to return to where it was from either a sales or margin standpoint, and that's why I would be a little cautious reading too much into last month's jump in the stock.

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Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends Lumber Liquidators. The Motley Fool has a disclosure policy.