Liquidity Services, Inc. (LQDT) operates online auction websites based in the US for sellers to remarket wholesale, surplus, and salvage assets. The company's stock has recently dropped by 27% from its 52-week high of $66.57 attained in May. I believe the plunge has created an excellent buying opportunity for this high-growth company, as the stock price is cheap relative to the company's robust fundamentals.

My value analysis is primarily based on comparing LQDT with a set of peers (See below), including some major online consumer service providers. There are five reasons to support a solid buy rating on LQDT:

1. The stock is cheaply priced relative to the company's growth potential. Analysts in average predict LQDT's revenues, EBITDA, and EPS to rise by significant 2-year CAGRs of 32.3%, 65.1%, and 156.2% over the current and next fiscal years. The expectations are substantially higher than the peer averages of 22.2%, 147.3%, and 17.1%, respectively. However, the LQDT stock is only trading at 0.7x PEG, a much lower valuation compared to the peer average PEG of 1.3x.

2. Although revenue, EBITDA, and EPS estimates have experienced multiple upward revisions over the past 12-18 months, the stock's P/E and EV/EBITDA multiples remain very close to its 52-week lows (see below).

 

3. The stock price also appears to be cheap relative to the company's other fundamentals (see below). In addition to the fast-growth prospects, LQDT's ROE and ROIC are also superior to the peer averages. The company's profitability margins are generally lower than averages, but the underperformance in EBITDA margin and EBIT margin is just marginal. In term of liquidity, LQDT's LTM FCF margin is slightly lower than the peer average. With a comparable leverage level, the company is able to maintain a healthy interest coverage ratio. Both current and quick ratios suggest a fairly healthy and liquid corporate balance sheet. READ FULL ARTICLE HERE