Ethan Allen Interiors Inc.
(
ETH
) has long-term growth opportunities stemming from its expanded
product offerings, regular product introductions, cost control
efforts, increased marketing investments and other growth
initiatives.
This Zacks #1 Rank (Strong Buy) interior design company looks to
benefit from its Express program and strong chances for improvement
in home-related spending due to the gradually-stabilizing new home
market.
Fiscal First Quarter Coming Up
Ethan Allen is scheduled to report its fiscal first-quarter results
on October 17. Presently, the Zacks Consensus Estimate is calling
for 29 cents per share.
The company last reported on July 25. Adjusted earnings per share
of 27 cents for the fiscal fourth quarter grew 29% from 21 cents a
year earlier, driven by revenue growth and margin expansion.
However, the result missed the Zacks Consensus Estimate.
Revenue of $185.3 million increased 4.1% year over year, driven by
revenue growth in both the retail and wholesale divisions, despite
macroeconomic uncertainties and increased competition. Gross
margins expanded 100 basis points to 53.9% due to a better product
mix, which comprised a larger percentage of higher margin retail
sales. Adjusted operating margins grew 90 basis points to 7.7%.
The Zacks Consensus Estimate for fiscal 2013 stands at $1.27,
reflecting a year-over-year growth rate of 35.3%. The Zacks
Consensus Estimate for fiscal 2014 is $1.63, reflecting growth of
27.8%.
Growth Initiatives
Ethan Allen offers a diverse selection of complementary and
attractively priced products, while simultaneously refreshing its
merchandises at regular intervals. In the last three quarters of
fiscal 2012, it introduced a significantly higher number of new
products than normal.
Moreover, Ethan Allen has introduced a new initiative, Ethan Allen
Express program, which aims to expand its reach to a larger, more
affluent consumer through its new products and increased spending
on marketing and advertising. Sales should benefit from the
expanded customer base in future quarters. The company is also
redesigning its interior design regional network by building a
strong team of managers and designers and opening new design
centers.
Furthermore, Ethan Allen is expanding its international presence
and investing in technology. The company has also taken actions to
significantly reduce costs.
Overall, an Attractive Valuation
Ethan Allen currently trades at a forward P/E of 17.54x, a slight
discount to the peer group average of 17.69x. On a price-to-book
basis, the stock is trading in line with the peer group average. On
a price-to-sales basis, the stock is trading at 0.88, a discount of
23.5% to the industry average of 1.15.
The price and consensus chart shows that the stock price line has
been consistently below the earnings estimate lines, suggesting
that the stock is undervalued.
Based in Danbury, CT, Ethan Allen is a leading manufacturer and
retailer of stylish home furnishings, like furniture products and
other decorative accessories. These products are available both at
the company's online site, ethanallen.com, as well as at
approximately 300 retail design centers across the U.S. and abroad.
The company has a current market cap of $642.44 million.
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