This Lumber Liquidators chart should've raised red flags for everyone who saw it

Back in 2013, Whitney Tilson, the founder of hedge fund Kase Capital, first considered shorting Lumber Liquidators when he noticed something odd about its profit margins. They were exploding, largely due to expanding gross margins, which means the company had a remarkable control of its costs.

"When you see a commodity business suddenly double its profit margins, that raises red flags," Tilson told Anderson Cooper in an interview on "60 Minutes". "It's almost unprecedented for a company."

Lumber Liquidators - Tilson's largest short position - was part of a "60 Minutes" investigation. The report found that North America's largest specialty retailer of hardwood floor appeared to be selling laminate flooring made in China that had levels of formaldehyde that surpass what's allowed under California law.

Tilson was the one who first brought the story to "60 Minutes." He later wrote in an email that he's even more convinced the company's stock is a "zero." The stock is getting hammered.

Here's a chart from Lumber Liquidators breaking down profit margins. Tilson used it in his case against the company.

Whitney Tilson