Here's Your Chance to Own American Woodmark Before...

American Woodmark is scheduled to report fiscal second-quarter results on Tuesday morning, before the opening bell rings. A conference call to discuss results in detail will follow at 10 a.m. that day. Earnings per share are expected to represent a huge year-over-year improvement. Yahoo Finance sees the comparison coming in above triple the prior year's tally. Other research houses like Value Line, Morningstar, and FastGraphs have similar takes on what they think is coming next week. Fiscal Q3, which ends Jan. 31, and full fiscal 2022 results, which end April 30, are also expected to show large earnings increases as noted below. Results like those are bound to get traders much more excited about owning AMWD shares. I've written extensively about why fiscal 2022 will be so good. The firm's most important raw material cost is wood. Lumber prices have now regressed after nearly tripling in price from autumn of 2020 through the end of last year. A nine-month backlog of paid-up and already priced orders caused AMWD to honor the deliveries at those locked in prices. Price hikes were implemented to offset those losses and are now being fully realized after the pre-priced backlog was taken care of. With lumber prices now down -- but sales prices up -- that same nine-month backlog at higher prices is translating into major margin improvement. Value Line's $6.50 estimate for AMWD's current fiscal was $6.50 as recently as September. A blockbuster quarterly report of $1.71 vs. $0.70 (+144.3%) for the July interim has reset expectations for the rest of the year higher. Yahoo Finance is looking to see fiscal 2022's EPS at $6.75. Fast Graphs estimate is a few cents higher, at $6.94. Achieving that number would break AMWD's old record of $6.91 by a small amount. That might explain why AMWD gained greater than 32% between Oct. 20 and Nov. 15 as the firm approaches the next earnings report. The graphic below was originally published on Sep. 16th. My comments at that time still were based on the $6.50 EPS estimate which now appears too low. My somewhat conservative end of April 2023, price target for AMWD weighed in at $104. How could I call that conservative? AMWD topped out between $89 and $148 during each of the seven calendar years stretching from 2015 through 2021. All but one of those years saw final EPS well below what is now on tap for fiscal 2022. Fast Graphs sees American Woodmark's normalized multiple as 22.76-times. I've listed their April 2023 price projections using a more conservative 15 multiple and FastGraph's preferred 22-times P/E. Either one would provide excellent shareholder return over the coming six to eight months. Knowing all that, I've added dramatically to my AMWD long position. As of Wednesday, the stock was my second highest personal dollar holding. If you agree with my conclusions, then owning shares outright is the best way to go for unlimited upside potential as AMWD gets repriced appropriately. Option-savvy traders might wish to buy call options or short naked puts on AMWD. The longest expiration date right now is April 21, 2023. By next Monday there should be July 21, 2023, expiration date options trading as well. Selling an April 21, 2023 $60 strike price naked put for $9.80, with AMWD at $53.72 brought the if exercised price down to just $50.20 ($60 put minus $9.80). The $3.52 per share discount to the trade inception price translated into a 6.5% margin of safety vs. outright purchase. As of Wednesday, AMWD was offered at better than a 50% valuation discount to its normalized multiple. That situation seems poised to reverse itself quite quickly after the next quarterly report. Don't say I did not give advance notice in time to trade ahead of next week's quarterly report.

Here's Your Chance to Own American Woodmark Before...

AMWD posts earnings next week. Here's my take on the name right now and how to play it.

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