LSCO Lesco (MM)

Dutton Associates continues its coverage of LESCO, Inc. (Nasdaq:LSCO) maintaining its Buy rating and setting a 12 month target price of $18.00. The 10-page report by Dutton senior analyst Paul J. Resnik, CFA is available at www.jmdutton.com as well as from First Call, Bloomberg, Zacks, Reuters, Knobias, and other leading financial portals. LESCO is the largest supplier to the U.S. professional lawn-care and golf-course markets. Over the past four years, the Company has been engaged in an ongoing restructuring as it has sought to increase profitability and put itself on a growth path. After putting new management in place in 2001/2002, LESCO commenced to discontinue low-profit manufacturing operations, restart the expansion of its Service Center(C) chain, cut headquarters expense and reconfigure its distribution network. On October 7, 2005, LESCO consummated the sale of substantially all of its supply chain assets to Turf Care Supply Corp. (TCS). LESCO management believes, and we concur, that it can now achieve greater profitability and growth as it focuses on its retail operations. We note that the sale not only removes low-margin businesses from its mix but also frees up capital to more rapidly grow its profitable Service Center network using internally generated funds. We continue to assign the shares a valuation based on a 20 price/earnings multiple. Based on our 2006 EPS estimate of $0.90 (versus an estimated $0.44 in 2005), we have a 12 month price target of $18.00 for these shares. We note, however, that the shares are likely to find some support in the market from the Company's share repurchase program. Moreover, as LESCO supplies proof that its new business model can deliver the hoped-for growth, investors are likely to expand their time horizon for valuation to 2007 and beyond, enabling the shares to move to higher levels. About Dutton Associates Dutton Associates is one of the largest independent investment research firms in the U.S. Its 28 senior analysts are primarily CFAs and have expertise in many industries. Dutton Associates provides continuing analyst coverage of over 120 enrolled companies, and its research, estimates, and ratings are carried in all the major databases serving institutions and online investors. The cost of enrollment in our one-year continuing research program is US $35,000 prepaid for 4 Research Reports, typically published quarterly, and requisite Research Notes. Dutton Associates received $77,000 from the Company for 12 Research Reports with coverage commencing on 3/12/03. The Firm does not accept any equity compensation. Our principals and analysts are prohibited from owning or trading in securities of covered companies. The views expressed in this research report accurately reflect the analyst's personal views about the subject securities or issuer. Neither the analyst's compensation nor the compensation received by us is in any way related to the specific ratings or views contained in this research report or note. Please read full disclosures and analyst background at www.jmdutton.com before investing.