Homeowners’ investments in their homes and the industry’s innovative offerings have led to growth in the home renovation sector. Technology is influencing how homeowners approach projects and the industry’s future.
So, it could be wise to add quality home improvement stocks La-Z-Boy Incorporated (LZB), Haverty Furniture Companies, Inc. (HVT), and Bassett Furniture Industries, Incorporated (BSET) to one’s portfolio now.
Technology and innovation are altering the home renovation industry, offering homeowners a variety of fresh tools and materials to help them build the homes of their dreams. The options are boundless, from smart home devices to green home renovations, CNC equipment, to 3D printing.
The remodeling market has been continuously expanding over the last few years thanks to rising demand. Moreover, the global remodeling market is projected to be worth $5.46 billion by 2029, increasing at a 4.1% CAGR.
The global home improvement market is projected to continue growing due to rising disposable income, rapid urbanization, and changing consumer preferences. According to Report Ocean, the global home improvement market is predicted to expand at a CAGR of 6.4% until 2028.
La-Z-Boy Incorporated (LZB)
LZB produces, markets, imports, exports, distributes, and retails accessories and case goods furniture products in the United States, Canada, and internationally. The company operates through Wholesale; Retail; Corporate; and other segments.
LZB’s trailing-12-month EBIT margin of 9.96% is 28.2% higher than the industry average of 7.77%. Its trailing-12-month gross profit margin of 41.28% is 17.9% higher than the industry average of 35%.
Over the last three years, LZB’s dividend payouts have grown at an 8.7% CAGR. While LZB’s four-year average dividend yield is 1.77%, the company’s annual dividend of $0.73 yields 2.50% at the current price level.
During the third quarter of the fiscal year 2023 that ended January 28, 2023, LZB’s non-GAAP operating income increased 34.4% year-over-year to $53.18 million, while non-GAAP net income attributable to LZB increased 36.5% year-over-year to $39.23 million. Also, its non-GAAP diluted EPS increased 40% year-over-year to $0.91 for the same quarter.
LZB’s EPS is expected to grow 15.4% year-over-year growth to $3.59 in 2023. Its revenue is expected to be $2.32 billion in 2023. It has surpassed EPS estimates in all four trailing quarters. The stock has gained 28.8% over the past six months, closing the last trading session at $29.08.
LZB’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
LZB also has an A grade for Quality and B grade for Value. It is ranked #4 of 70 stocks in the Home Improvement & Goods industry. To access additional ratings for LZB’s Growth, Stability, Sentiment, and Momentum, click here.
Haverty Furniture Companies, Inc. (HVT)
HVT is a specialty retailer of residential furniture and accessories. It offers furniture merchandise under the Havertys brand name, along with custom upholstery products and eclectic looks, and mattress product lines under the Sealy, Tempur-Pedic, and Serta names, as well as the private label Skye name.
HVT’s trailing-12-month EBIT margin of 11.26% is 44.9% higher than the industry average of 7.77%. Its trailing-12-month gross profit margin of 57.70% is 64.8% higher than the industry average of 35%.
HVT has paid dividends for ten consecutive years. Over the last three years, HVT’s dividend payouts have grown at a 12.8% CAGR. While HVT’s four-year average dividend yield is 8.57%, the company’s annual dividend of $1.12 yields 3.51% at the current price level.
For the fourth quarter, ended Dec. 31, 2022, HVT’s net sales increased 5.5% year-over-year to $280.56 million. Its gross profit grew 6.6% from its year-ago value to $159.94 million. The company’s EPS came in at $1.42, an increase of 5.2% year-over-year.
The consensus revenue estimate of $1.01 billion for the year ending 2024 represents a marginal increase year-over-year. Its EPS is expected to grow 13.1% per annum for the next five years. It has surpassed EPS estimates in all four trailing quarters. The stock has gained 42.2% over the past nine months to close its last trading session at $31.91.
HVT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, translating to Buy in our proprietary rating system. HVT is also rated an A for Quality and a B for Value. Within the same industry, it is ranked #3.
Click here to see additional POWR Ratings for Growth, Stability, Sentiment, and Momentum for HVT.
Bassett Furniture Industries, Incorporated (BSET)
BSET develops, manufactures, sources, sells, and distributes home furnishings internationally. It operates in three segments: Wholesale; Retail company-owned stores; and Logistical services. The company operates a network of more than 63 company-owned and 34 licensee-owned stores.
BSET’s trailing-12-month net income margin of 12.88% is 182.5% higher than the industry average of 4.56%. Its trailing-12-month gross profit margin of 52.19% is 49.1% higher than the industry average of 35%.
Over the last three years, BSET’s dividend payouts have grown at a 7.4% CAGR. While BSET’s four-year average dividend yield is 8.57%, the company’s annual dividend of $0.64 yields 3.60% at the current price level.
BSET total current liabilities came in at $90.58 million for the period that ended February 25, 2023, compared to $100.83 million for the period that ended November 26, 2022. Also, its total long liabilities came in at $107.18 million, compared to $109.84 million for the same period.
Analysts expect revenue to increase 3.7% year-over-year to $455.53 million in 2024. Its EPS is expected to increase 31.3% year-over-year to $2.14 in 2024. Moreover, the company has surpassed the consensus EPS in three of the trailing four quarters. Over the past month, the stock has gained 13.5% to close the last trading session at $17.80.
BSET’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
The stock has an A grade for Sentiment and a B for Value and Quality. Within the same industry, it is ranked #2. Beyond what we stated above, we also have BSET’s ratings for Growth, Stability, Sentiment, and Momentum. Get all BSET ratings here.
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LZB shares were trading at $28.97 per share on Monday afternoon, down $0.11 (-0.38%). Year-to-date, LZB has gained 27.68%, versus a 7.47% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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