Mohawk Industries is a titan of flooring, but this global company might just be that stable 'reopening' stock that you've been looking for.
A flooring manufacturer might not be the most exciting of companies to invest in, but boring stocks are often a nice stable option to include in a tech-heavy portfolio. Mohawk Industries could be that stock for many as economic recovery is encouraging a housing boom. The company manufactures all types of flooring from carpet to tile, to wood. Whilst its stock has seen steady growth since March 2020, we ask if this 'reopening' stock is a good buy right now.
Bull case
Mohawk Industries has seen its stock price rise more than 60% in 2021 alone and just under 180% in the last 12 months. But it is not just its stock price that has done well, the company, in general, performed very well over the course of 2020 and even ended the year with a strong $1.3 billion in free cash flow. This is a very financially healthy company.
Additionally, over the next few years, analysts expect this company to more than double its current earnings as they expect a bright future with high growth for Mohawk. This will then lead to even stronger cash flows as well as a higher share value.
For Q1 2021, Mohawk Industries released a report detailing a record sales quarter for the company, with sales totaling $2.67 billion, up 16.8% year-over-year (YoY). Its earnings per share were also up an impressive 110% YoY, coming in at $3.49. This has definitely been encouraged by the current boom in housing and housing-related activities such as renovations in preparation for selling. Its business will again continue to grow in Q2 as more re-openings across the country will boost sales.
Although house prices are soaring right now, experts are not worried about another housing market crash, instead, it is likely that the rise in prices will encourage more houses to be built, which will even out the rapid house price inflation. More houses, means more contracts for Mohawk industries, particularly as it is one of the largest names in flooring across the world.
With a strong bull case, this company has the potential for good, if not great, returns on investments made now.
Bear case
Whilst this company presents a great case as a re-opening stock for your portfolio, it would be prudent to remain cautious. It wasn't too long ago that the company was accused of fraud. It was accused of misleading investors by fabricating revenue whilst it missed its targets.
An internal review into last year's allegations concluded that they were without merit. Bu,t the worry is that now Mohawk has indeed been investigated by the SEC for fraud, it will face stricter scrutiny in the future, from investors and clients alike.
Furthermore, if reopening plans stall due to the pandemic, then Mohawk will see a decrease in sales again. However, considering its stellar performance in 2020 as well as its strong cash flow, this flooring company is not likely to be overly affected.
So, is Mahawk Industries a good buy?
Mohawk Industries is enjoying the current boom in housing and house refurbishments. This 'boom' is not likely to crash any time soon and could further encourage an increase in building activity, all of which is positive news for this flooring company. With many analysts predicting that its share price will continue to grow and with its revenue already increasing to pre-covid levels, this re-opening stock is a good option for any portfolio.
Quickfire Round:
- Who owns Mohawk Industries?
With a 15% stake, CEO, Jeffery Lorberbaum owns the largest share of the company.
- Where is Mohawk headquartered?
Calhoun, Georgia, United States.
- Does Berkshire Hathaway own Mohawk Industries?
No, Berkshire Hathaway owns a 19% state in Mohawk's rival, Shaw.
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MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.
