It's Time to Renovate Your Portfolio With This Home Accessory Company

American Woodmark is not well known among average investors. That's too bad, as it's proven to be a reliable growth stock and a true wealth creator. The firm manufactures and distributes kitchen cabinets and bathroom vanities for the home construction and remodeling markets. Home Depot and Lowe's account for almost half of AMWD's annual sales. Its major bands are shown below. COVID-induced, stay-at-home orders last year made people anxious to buy new and better homes or to remodel their old kitchens and bathrooms. AMWD benefits from both those, still ongoing, trends. Continuous shareholders have nothing to complain about. Prospective buyers of the shares shouldn't either. AMWD more than quintupled over exactly nine years through May 31, yet that significant gain, at last month's quote, reflected less than half the stock's cumulative percentage EPS increase. What is AMWD really worth? From fiscal 2013 through fiscal 2019 a typical price-to-earnings ran about 19.1-times. Applying even a 17.5-times multiple to AMWD's current year's estimate (fiscal 2022 ends April 30, 2022) supports a 12-month target price north of $135. That implies potential upside of greater than 59%. There's every reason to think AMWD might rebound to at least that goal as America's economy gets back toward normal. AMWD topped out between $108 and $148 during each of the five years stretching from 2017 right through 2021 year to date. AMWD's projected results for both fiscal 2022 and fiscal 2023 look for all-time records across all major metrics. AMWD's year-to-date peak was $108.81. It changed hands north of $95 last Thursday morning after a new $100 million buyback authorization was approved by the board of directors. AMWD's $85 share price is likely to be a very short-term duration anomaly. Yahoo Finance sees the stock rebounding to near $111 by this time next spring. Reaching that modest goal, implying just a 14.3-times trailing multiple, would still deliver a greater than 30% gain. Owning shares outright is the best way to play for maximum unlimited upside on this fine growth company. Traders willing to sell naked puts out to next January can get paid handsomely for standing ready to buy even cheaper than the current quote. The graphic below details actual pricing for AMWD's Jan. 21, 2022 expiration date $85, $90 and $95 strike price puts with the shares at $85.03. Worst-case, forced-purchase prices dropped to a range of from $74.60 to $78.50 depending on the strike price selected. If you like AMWD near $85 it would hard not to love it at prices 7.6% to 12.2% cheaper. Maximum profit on these, or any other option sales, always equals 100% of all money collected up front. In these examples that would come to either $1,040, $1,340 or $1,650 per each 100-share commitment. The best (juiciest) put premiums are typically available on days when the underlying shares are down big, as were AMWD last Thursday and Friday. Once the shares stabilize, or rebound in price, implied volatility drops down and premiums become less attractive. I've traded in and out of American Woodmark many times over the years. Every single experience has proven profitable. Don't miss this latest chance to establish new positions while the valuation is temporarily depressed. Buy some AMWD shares, sell some puts or consider doing both.

It's Time to Renovate Your Portfolio With This Home Accessory Company

American Woodmark is another buying opportunity on a 'left to right' growth stock.

Columnist Conversation

Tuesday Morning Fibocall for 6/15/2021

Tuesday on Real Money Pro

This Weekend on Real Money

COLUMNIST TWEETS

Please Join or Log In to manage and receive alerts.