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2 Small Cap Furniture Stocks to Buy as the Housing Market Soars
In recent months, the booming U.S. housing market has been having a positive spillover effect on the furniture industry. With remote working arrangements inducing people to move from crowded metropolises to sub-urban locales for larger living spaces , the demand for furniture has been on the rise. According to Satista.com, United States furniture sales improved 174.4% in seven months to $10.70 billion in November 2020, up from $3.90 billion in April.
This trend is likely to continue because housing market continues to grow amid the low-interest-rate environment. The U.S. furniture industry is expected to generate total revenues worth $247.84 billion in 2021 and is projected to grow at a CAGR of 2.17% over the next five years.
Furthermore, small-cap companies typically outperform large- and mid-cap companies in periods of economic recovery.
So, against the current macroeconomic backdrop, we expect small-cap furniture stocks Haverty Furniture Companies, Inc. (HVT) and Bassett Furniture Industries, Incorporated (BSET) to generate manifold returns.
Haverty Furniture Companies, Inc. (HVT)
With a market cap of $685.67 million, HVT operates as a specialty retailer of residential furniture and accessories. The company sells home furnishings through its retail stores that are located in Florida, Texas, and North Carolina, and through its websitehavertys.com. HVT also offers financing through a third-party finance company and an internal revolving charge credit plan.
The company’s net sales increased 12.9% year-over-year to $241.34 million for the fourth quarter, ended December 31, 2020. Its gross profit has increased 18.8% year-over-year to $137.62 million. HVT’s net income for the quarter was $25.43 million, up 316.9% year-over-year. Its adjusted EPS has increased 242.5% year-over-year to $1.37.
A consensus EPS estimate of $0.41 for the quarter ending March 31, 2021 represents an improvement of 355.6% year-over-year. Also, HVT surpassed the consensus EPS estimates in three of the trailing four quarters. The consensus revenue estimate of $197.51 million for the next quarter, ending June 30, 2021, represents a 79.6% gain on a year-over-year basis.
On February 23, HVT’s Board of Directors declared a cash dividend on the company’s outstanding shares of the two classes of $1 par value common stock at a rate of $0.22 per share on the common stock and $0.20 per share on the Class A common stock, payable on March 25. Its Board also appointed Steven Burdette as company President, effective March 1. The stock has gained 182.9% over the past year and closed yesterday’s trading session at $37.62.
HVT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
The stock has an A grade for Growth, Value, Momentum and Quality. We have also graded HVT for Stability and Sentiment. Click here to access all HVT’s ratings.
HVT is ranked #1 of 63 stocks in the A-rated Home Improvement & Goods industry.
Bassett Furniture Industries, Incorporated (BSET)
Based in Bassett, Virginia, BSET is a manufacturer, importer and retailer of home furnishings. The company operates primarily through three segments—Wholesale, Retail stores and Logistical services. BSET also provides shipping and warehousing services to customers in the furniture industry. It has a market capitalization value of $255.39 million.
BSET’s total sales revenue for its fiscal 2020 fourth quarter, ended November 28, 2020, was $118.38 million, which represents an improvement of 4.2% year-over-year. Its net sales from its wholesale segment increased nearly 8% year-over-year to $67.49 million. Its adjusted net income for the fourth quarter was $6.54 million, up 806.2% year-over-year. And its adjusted EPS increased 828.6% year-over-year to $0.65.
A consensus EPS estimate of $0.23 for the quarter ended February 28, 2021 represents an improvement of 91.7% year-over-year. BSET surpassed the consensus EPS estimates in three of the trailing four quarters. The consensus revenue estimate of $457.59 million for the fiscal 2021 represents a 18.6% rise on a year-over-year basis.
The company’s Board of Directors has declared a regular quarterly dividend of $0.13 per share of common stock, payable on May 28, 2021. BSET also announced this month that its wholesale orders for the quarter ended February 27, 2021 increased 44% year-over-year to $83 million. The company is also in lease negotiations for a manufacturing facility in Newton, North Carolina that is expected to be finalized by month’s end. The stock has gained 290.7% over the past year and closed yesterday’s trading session at $25.67.
BSET’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system.
The stock has an A grade for Quality, Sentiment and Momentum and a B grade for Growth and Value. In addition to the POWR Ratings grades I’ve just highlighted, you can see BSET’s ratings for Stability here.
BSET is ranked #2 in the same industry.
The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
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HVT shares were trading at $38.24 per share on Wednesday afternoon, up $0.62 (+1.65%). Year-to-date, HVT has gained 39.03%, versus a 6.30% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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