In 2019, I gutted my bathroom in preparation of a remodel. But after completing the demolition, I made a last-minute change to my remodel plan. I needed a particular flooring product fast and tried sourcing it at local home-improvement retailers in vain. I then stumbled upon a Floor & Decor (FND -0.40%) about one hour away from my home and found exactly what I needed.
Investing great Peter Lynch advocated for buying what you know. And as I drove home from Floor & Decor that day, I wondered if it was publicly traded. Shortly thereafter, I discovered it was, researched the business, and purchased shares.
Floor & Decor has been a great investment for me so far. But after what the company just did, I might double down. Here’s why.
Why Floor & Decor stock has beaten the market
Floor & Decor went public in 2017 and has since outperformed the market average by a wide margin.
There’s a lot that goes into an investment thesis. But three things that I look for in retail businesses like Floor & Decor are unit growth (opening new locations), growth in same-store sales (comps), and profitability. Floor & Decor has all three, and that’s what attracted me to it as an investment.
Here are the numbers since it went public.
|Net income growth||139%||13%||30%||29%||45%|
By opening new stores this fast, Floor & Decor has grown its revenue at a rapid pace. Comps growth helps increase revenue, too, but it also helps the company gain operating leverage because there are fixed costs at the store level. Lastly, retail businesses