Floor & Decor Holdings, Inc. (FND) stock intrinsic value fair value estimate & owner earnings analysis

Floor & Decor is a specialty retailer of hard surface flooring. At December 25, 2025 it operated 270 warehouse-format stores (average about 76,000 square feet) plus five small-format design studios across 39 states, and five distribution centers. Net sales were $4,684 million in fiscal 2025, up 5.1% from $4,456 million, driven by 20 new stores; comparable-store sales fell 1.8% after falling 7.1% in fiscal 2024. How we measure earnings. We start from operating cash flow, remove swings in working capital (inventory, receivables, payables, accruals, taxes), subtract stock compensation as a real cost, and subtract maintenance capital spending. Because the company builds a lot of stores, this matters. Our method treats growth spending as only the portion tied to the revenue increase, so in years when sales barely grew (fiscal 2023 and 2024) nearly all capital spending was counted as maintenance. That is why owner earnings per share were negative in those two years (about -$0.53 and -$0.03) even though the company reported net income of $246 million and $206 million. Across fiscal 2019 to 2025 owner earnings per share were $0.55, $1.15, $0.88, $0.70, -$0.53, -$0.03 and $1.20. We use the median of that seven-year window, $0.70, as the earnings level. Fiscal 2016 to 2018 are excluded because they describe a much smaller business (net sales of $1,710 million in fiscal 2018 versus $4,684 million in fiscal 2025). Fiscal 2025 alone ($1.20) is not used as the level, and neither are the two negative years. We tested this level against the company's own fiscal 2026 spending plan: about $160-190 million is for opening 20 stores and starting later ones, versus about $60-70 million for existing stores and distribution centers and $30-40 million for technology. True upkeep spending therefore appears to be well below what our method deducts in low-growth years, so $0.70 looks conservative rather than generous. Year-one growth in the base case is 3%, applied to $0.70. The most recent year is not a usable trailing growth rate because fiscal 2024 was slightly negative; the assumed 3% is below fiscal 2025 revenue growth of 5.1%. Base case: about $14 per share. Owner earnings of $0.70 grow 3% a year for eight years, then hold flat indefinitely. The 3% is the demonstrated pace: net sales grew from $4,414 million in fiscal 2023 to $4,684 million in fiscal 2025, about 3% a year, while the company kept opening stores (20 in fiscal 2025 and 20 planned for fiscal 2026, with fiscal 2026 capital spending expected to be funded primarily by cash from operations). We did not credit margin expansion or a recovery in comparable sales, because neither is secured. After year eight we assume the existing stores keep earning at the level reached, with upkeep spending already deducted, and no further growth. Bear case: about $3.30 per share. Owner earnings drop to $0.35 a year, half the base level, and stay there for ten years, then decline in a straight line to zero over the following ten years. The named pressures are: the company sources the majority of its products from suppliers outside the United States, exposing it to the risks of obtaining products from abroad; two consecutive years of falling comparable-store sales; and a $198.2 million term loan that matures on February 14, 2027 and would need to be refinanced or repaid. The company has no ABL borrowings outstanding and $660.5 million of unused availability, so debt is modest relative to earnings power; leverage is not the main risk. The half-of-base level is our judgement of a plausible squeeze rather than a figure taken from a filing. Bull case: about $25 per share. Owner earnings start at $1.00, a level reached in fiscal 2020 ($1.15) and fiscal 2025 ($1.20), and grow 5% a year for ten years, matching fiscal 2025 revenue growth of 5.1%, then hold flat indefinitely. This requires the store openings to keep adding to sales without the recent comparable-store declines continuing. No net debt has been subtracted and no balance-sheet cash added, since owner earnings are already after interest. The wide gap between cases reflects how much the result depends on how the company's heavy store-building spending converts into earnings. Our view of fair value would be wrong on the downside if import costs cannot be passed on to customers, and on the upside if comparable-store sales return to growth. The margin-of-safety price is roughly half the base value, about $7 per share, because the downside case is far below the base case and yearly owner earnings have been volatile.