Hooker Furniture Corp. – Value Analysis (NASDAQ:HOFT) : November 21, 2017

Capitalcube gives Hooker Furniture Corp. a score of 75.

Our analysis is based on comparing Hooker Furniture Corp. with the following peers – Bassett Furniture Industries, Inc., Flexsteel Industries, Inc., LaZBoy Incorporated, Stanley Furniture Company, Inc., Nova Lifestyle, Inc., Sleep Number Corporation and Natuzzi S.p.A. Sponsored ADR (BSET-US, FLXS-US, LZB-US, STLY-US, NVFY-US, SNBR-US and NTZ-US).

Investment Outlook

Hooker Furniture Corp. has a fundamental score of 75 and has a relative valuation of OVERVALUED.

Fundamental Score

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Company Overview

  • Compared to peers, relative outperformance over the last year has faded more recently.
  • It currently trades at a Price/Book ratio of (2.73).
  • HOFT-US‘s operating performance is relatively good compared to its peers. The market currently does not expect high earnings growth relative to its peers but seems to expect the company to maintain its relatively high rates of return.
  • HOFT-US‘s relative asset efficiency and net profit margins are both around the median level.
  • The company’s year-on-year change in revenues and earnings are better than the median among its peer group.
  • Over the last five years, HOFT-US‘s return on assets has improved from median to better than the median among its peers, suggesting the company has found relative operating advantages.
  • The company’s median gross margin and relatively high pre-tax margins suggest non-differentiated product portfolio but with tight cost control relative to peers.
  • While HOFT-US‘s revenues in recent years have grown faster than the peer median, the market gives the stock a P/E ratio that is around peer median suggesting that the market has some questions about the company’s long-term strategy.
  • The company is likely overinvesting in a business with only median returns.
  • HOFT-US has the financial and operating capacity to borrow quickly.

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Leverage & Liquidity

HOFT-US has the financial and operating capacity to borrow quickly.

  • With debt at a relatively low 9.12% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 0.64%), and a well-cushioned interest coverage level of 46.98x, HOFT-US can probably borrow quickly. We classify the company as Quick & Able in terms of its capacity to raise additional debt.
  • Of the 7 chosen peers for the company, only 4 of the stocks have an outstanding debt balance. Companies with no debt include FLXS-US, STLY-US and SNBR-US.

HOFT-US has maintained its Quick & Able profile from the recent year-end.

  • HOFT-US‘s interest coverage has increased 4.61 points from last year’s low but is still below its five-year average interest coverage of 680.12.
  • The increase in its interest coverage to 46.98x from 42.37x (in 2017) was also accompanied by an increase in its peer median during this period to 48.89x from 46.58x.
  • Interest coverage rose 2.30 points relative to peers.
  • HOFT-US‘s debt-EV has declined 2.76 percentage points from last year’s high and is now below its five-year average debt-EV of 11.89.
  • The decrease in its debt-EV to 9.12% from 11.89% (in 2017) was also accompanied by a decrease in its peer median during this period to 0.64% from 2.68%.
  • Relative to peers, debt-EV fell 0.72 percentage points.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Bassett Furniture Industries, Inc. 1.24 2.07 50.8 811.78
Flexsteel Industries, Inc. 0 4.85 No interest exp 999
LaZBoy Incorporated 0.03 2.8 113.67 25682.24
Stanley Furniture Company, Inc. 0 3.54 -55.13 999
Nova Lifestyle, Inc. 13.73 73.51 -1.83 197.02
Sleep Number Corporation 0 0.5 93.16 1988.47
Natuzzi S.p.A. Sponsored ADR 36.06 1.51 -2.49 -13.42
Hooker Furniture Corporation 9.12 4.08 46.98 89.99
Peer Median 0.64 3.17 48.89 905.39
Best In Class 0.03 73.51 No interest exp 25682.24

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Company Profile

Hooker Furniture Corp. is a home furnishings marketing and logistics company. It offers worldwide sourcing of residential casegoods and upholstery, as well as domestically-produced custom leather and fabric-upholstered furniture. The company operates its business through three segments: Casegoods, Upholstered and All Other. Its major casegoods product categories include home entertainment, home office, accent, dining and bedroom furniture under the Hooker Furniture brand, and youth furniture sold under the Opus Designs by Hooker brand. The company designs and markets its furniture, both as stand-alone products and as part of a group of products within multi-piece groups or broader collections offering a unifying style, design theme and finish. Its collections include offerings, such as Abbott Place, Beladora, Harbour Pointe and Sanctuary collections. The company’s residential upholstered seating companies, include Bradington-Young LLC, a specialist in upscale motion and stationary leather furniture, and Sam Moore Furniture LLC, a specialist in upscale occasional chairs, settees and sectional seating with an emphasis on cover-to-frame customization. Its customers include independent furniture stores, specialty retailers, department stores, catalog and internet merchants, interior designers and national and regional chains. Hooker Furniture was founded in 1924 and is headquartered in Martinsville, VA.

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