LQDT

We rate LIQUIDITY SERVICES INC (LQDT) as a Buy with a composite score of 71.7/100 at a current price of $30.67. The stock scores above average across the majority of our six quantitative factors and ranks #65 out of 7,333 stocks in our universe, reflecting a favorable risk-reward profile.

The rating is primarily driven by strength in quality (90th percentile) and value (88th percentile), which together account for the majority of the composite score. All factors score above the 40th percentile, indicating no material weakness in the quantitative profile. We assign a Narrow Moat rating (41/100), Low uncertainty, and Standard capital allocation.

Key items to watch: sustainability of the current growth rate. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

LIQUIDITY SERVICES INC holds a top-quartile position (#6 of 50) within the Services sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 71.7/100 places it at rank #65 in our full 7,333-stock universe. At $857M in market capitalization, LIQUIDITY SERVICES INC is a small-cap player in the Services space, which limits certain scale advantages but may allow for more agile strategic execution.

The near-term outlook is constructive, with revenue growing at 33% and momentum in the 68th percentile confirming positive market sentiment and institutional accumulation. The combination of strong top-line growth and favorable price dynamics suggests the company is executing well on its growth strategy. Investment factor at the 51th percentile indicates reinvestment patterns that investors should monitor for sustainability.

The margin cascade tells an important story: gross margins of 47% (-13.0pp vs sector) narrow to operating margins of 8% (+4.1pp vs sector) and net margins of 6.2%, yielding a gross-to-net conversion rate of 13%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $30.67, LIQUIDITY SERVICES INC appears undervalued relative to its fundamentals. Our value factor score of 88/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at a P/E of 35.3x (a 49% premium to the sector median of 23.7x), EV/EBITDA of 28.8x (at a premium), P/B of 4.6x, P/S of 2.2x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis partially supports given strong quality metrics.

We assign a Low uncertainty rating to LIQUIDITY SERVICES INC. The company exhibits strong financial stability with a beta of 0.70, and a stability factor in the 78th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

We identify no major risk factors at this time. The company's stability factor sits at the 78th percentile with quality at the 90th percentile, both of which support our low-risk assessment. The absence of material leverage, profitability, or volatility concerns reduces the likelihood of a permanent capital loss scenario.

Key risk mitigants include: healthy gross margins of 47% provide a buffer against cost pressures; above-average stability (78th percentile) suggests predictable business dynamics. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate LIQUIDITY SERVICES INC's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 13.0%, and the balance sheet is managed within acceptable parameters (D/E: 71%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; LIQUIDITY SERVICES INC falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. Absent a dividend, the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, LIQUIDITY SERVICES INC receives a Buy rating with a composite score of 71.7/100 (rank #65 of 7,333). Our quantitative framework assigns a Narrow Moat (41/100, trend: stable), Low uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 75/100.

Our analysis supports a constructive view on LIQUIDITY SERVICES INC. The combination of identifiable competitive advantages, low uncertainty, and standard capital allocation creates a risk-reward profile that favors accumulation at current levels. We recommend investors consider adding this name to portfolios aligned with the stock's risk profile.