Louisiana-Pacific (LPX): Exploring Valuation After Analyst Downgrade and Weak Earnings Outlook

If you’ve been keeping an eye on Louisiana-Pacific (LPX) lately, you’ll know it’s been a challenging stretch. The stock has come under pressure following recent analyst reports signaling that the company is expected to post a drop in both earnings per share and revenue in its next earnings release. This negative outlook has contributed to a shift in market sentiment, with investors growing cautious about the company’s near-term prospects as reflected by its current Zacks Rank of #5. This rank highlights skepticism about future performance.

Looking at the broader picture, Louisiana-Pacific’s share price has declined over the past month, reflecting concerns about its upcoming earnings. Year-to-date, the stock has seen a decline, erasing some of its post-pandemic gains. Despite this, the company’s three-year and five-year total returns still outpace many of its peers. This suggests that long-term shareholders have seen considerable value even as short-term sentiment fades. Recent momentum, though, is clearly to the downside as the market processes the risk of weaker earnings ahead.

With the shares sliding and sentiment firmly on the defensive, investors may be wondering if this is where Louisiana-Pacific becomes a value play or if the market is simply adjusting to a more realistic growth outlook.

Most Popular Narrative: 13.8% Undervalued

The most widely followed narrative sees Louisiana-Pacific as undervalued, with analysts calculating a fair value above today’s price. Their consensus highlights multiple business catalysts and incorporates future revenue and earnings projections.

Accelerated adoption of LP’s SmartSide and ExpertFinish trim and siding products, driven by increasing demand for sustainable, labor-saving, and durable materials across new construction, repair/remodel, and manufactured housing, should support above-market volume growth and price realization. This is expected to lift long-term revenue and gross margin.

Curious what’s lurking behind this undervalued call? The financial engine here runs on bold targets for earnings and margins, featuring ambitious expectations about future growth and a powerful profit multiple typically reserved for investor favorites. Want to know which one factor will make or break the $100+ price target? Only a deep dive into the narrative’s math will reveal how those numbers stack up.

Result: Fair Value of $102.4 (UNDERVALUED)

Have a read of the narrative in full and understand what’s behind the forecasts.

However, sustained weakness in U.S. housing starts or persistently low OSB prices could quickly undermine this optimistic outlook and put pressure on Louisiana-Pacific’s earnings momentum.

Find out about the key risks to this Louisiana-Pacific narrative.

Another View: Discounted Cash Flow Model Sends a Warning

While analysts see undervaluation on traditional measures, our SWS DCF model paints a different picture. The model suggests Louisiana-Pacific may actually be overpriced based on future cash flow projections. Which side gets it right?

Look into how the SWS DCF model arrives at its fair value.

Stay updated when valuation signals shift by adding Louisiana-Pacific to your watchlist or portfolio. Alternatively, explore our screener to discover other companies that fit your criteria.

Build Your Own Louisiana-Pacific Narrative

If you see things differently or would rather dig into the numbers on your own terms, you’re free to craft a personalized LPX story from scratch in just a few minutes. Do it your way

A great starting point for your Louisiana-Pacific research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data
and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your
financial situation. We aim to bring you long-term focused analysis driven by fundamental data.
Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
Simply Wall St has no position in any stocks mentioned.

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