How much will Lovesac owe in January?

Lovesac (NASDAQ: LOVE) has caught the attention of investors with its recent rally, sparking curiosity about its potential for further gains. The company's financial leverage paints an intriguing picture. With total stockholder equity at $217.5 million and short and long-term debt totaling $175.5 million, Lovesac's leverage ratio suggests a moderate level of debt relative to its equity. This balance indicates that while the company has some debt obligations, it isn't overly reliant on borrowed funds, which can be a positive sign for investors wary of excessive leverage. Furthermore, Lovesac's net income of $23.9 million and a healthy free cash flow of $47.2 million highlight its ability to generate cash, potentially supporting future growth initiatives. However, investors should remain cautious and consider market conditions and industry trends in the furnishings sector before making any investment decisions. Lovesac is set to release its earnings report tomorrow. Recent trends suggest a notable increase in its cash reserves. This year, stock-based compensation is anticipated to rise to approximately $4.3 million, while net borrowings are expected to decrease to around $60.4 thousand. With many millennials steering clear of the household durables sector, it's worth taking a closer look at Lovesac to better grasp its current market dynamics.
Published over a month ago
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Reviewed by Gabriel Shpitalnik

Lovesac (NASDAQ: LOVE) has shown a notable rally, and from a leverage perspective, there might be room for further gains. With total assets of 482.2M and a recent price percent change of 0.32, investors leveraging their positions could potentially amplify their returns if the stock continues its upward trajectory.

Main Considerations

Lovesac has $175.5 million in liabilities and a Debt to Equity (D/E) ratio of 0.77, which is fairly typical for its industry peers. With a current ratio of 2.09, the company appears to have sufficient liquidity to meet its financial obligations as they come due. It's important to evaluate Lovesac's debt in conjunction with its cash reserves and equity to get a complete picture of its financial health.
Lovesac financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures the total debt position of Lovesac, including all of Lovesac's outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of Lovesac assets, the company is considered highly leveraged. Understanding the composition and structure of overall Lovesac debt and outstanding corporate bonds gives a good idea of how risky the capital structure of a business is and if it is worth investing in it. Please read more on our technical analysis page.

Understanding Lovesac Total Liabilities

Lovesac liabilities are broken down into two parts on the balance sheet. These are short-term (or current) obligations and long-term debt. Lovesac has to fulfill its short-term liabilities in this reporting year and should be no more than 12 months old. Long-term debt, on the other hand, is anything beyond the 12-month payment timeframe. Common short-term liabilities found on Lovesac balance sheet include debt obligations and money owed to different Lovesac vendors, workers, and loan providers. Below is the chart of Lovesac short long-term liabilities accounts currently reported on its balance sheet.
You can use The Lovesac financial leverage analysis tool to get a better grip on understanding its financial position

How important is Lovesac's Liquidity

Lovesac financial leverage refers to using borrowed capital as a funding source to finance The Lovesac ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Lovesac financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to Lovesac's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Lovesac's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between Lovesac's total debt and its cash.

Another angle On Lovesac

Lovesac reported the previous year's revenue of 700.26 M. Net Income was 23.86 M with profit before overhead, payroll, taxes, and interest of 345.83 M.

Liabilities Breakdown

56.9 M
Total Current Liabilities
166.2 M
Non Current Liabilities Total
Total Current Liabilities56.89 Million
Liabilities And Stockholders Equity506.29 Million
Non Current Liabilities Total166.24 Million
They say "the trend is your friend," and Lovesac (NASDAQ: LOVE) seems to be riding a positive wave, with its stock showing promising momentum.
With a beta of 2.92, Lovesac is significantly more volatile than the market, which could mean more pronounced price swings but also the potential for greater returns. The company's debt-to-equity ratio stands at a modest 0.77%, indicating a conservative approach to leverage, which can be reassuring for investors wary of over-leveraged companies. Furthermore, with a solid operating income of $30.1 million and free cash flow of $47.2 million, Lovesac appears to be in a strong position to capitalize on future growth opportunities. As the stock rallies, investors might find more upside potential, especially considering the 7.08% potential upside..

Will Lovesac pull back in January 2025?

Lovesac's stock has recently experienced a shift in its distribution pattern, with skewness dropping to 2.2. This indicates a more balanced spread of returns, suggesting that the stock's recent upward momentum may be stabilizing. As we near January 2025, this could signal a potential pullback. Investors should take note of this change and reassess their positions, as the reduced skewness might mean that recent gains are becoming less pronounced, possibly leading to a period of consolidation or correction. As of December 3rd, Lovesac's Market Risk Adjusted Performance stands at 0.5277, with a risk-adjusted performance of 0.165 and a downside deviation of 2.68.
It's important to review Lovesac's variance and the relationship between value at risk and skewness to determine if the current price of $38.06 per share accurately reflects market conditions. With a Jensen Alpha of 0.6413, it's advisable to monitor Lovesac's recent market performance to ensure the company's sustainability moving forward.Considering Lovesac's recent upward movement, it's essential to weigh the potential for continued growth against market realities. With an Analyst Overall Consensus of "Strong Buy" and a Naive Expected Forecast Value of 41.52, there seems to be optimism surrounding the stock's future. However, investors should remain cautious and consider the Analyst Lowest Estimated Target Price of 46.59 as a benchmark for potential gains. As always, it's crucial to stay informed and evaluate whether Lovesac aligns with your investment strategy and risk tolerance..

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Editorial Staff

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