Given the increasing costs of moving to new homes and the enhanced focus of homemakers to improve the value of their properties, spending on home renovations and upgrades is surging. Furthermore, amid growing environmental concerns, homeowners’ preferences toward automated and energy-efficient solutions are reshaping the industry.
Thus, it could be wise to buy fundamentally sound home improvement stocks Hooker Furniture Corporation (HOFT), Mohawk Industries, Inc. (MHK), and HNI Corporation (HNI) for substantial gains.
Rising disposable incomes and rapid urbanization have fueled the demand for home remodeling services. As more individuals attain higher levels of income, they are willing to spend on renovating projects to enhance the value and functionality of their properties. The global home remodeling market is projected to reach $1.09 trillion by 2032, growing at a CAGR of 5.6%.
As per a report by Grand View Research, the U.S. residential remodeling market is expected to attain a value of $716.18 billion by 2030, expanding at a CAGR of 4.6% from 2024 to 2030.
In addition, technological advancements play a vital role in revolutionizing the industry. The integration of smart home technology, energy-efficient solutions, and sustainable materials is becoming extremely popular among homeowners. This trend improves the overall appeal and comfort of homes and aligns with the increasing focus on eco-friendly practices.
Also, supportive government initiatives, including incentives and tax credits on green building construction, have fostered the prospects of the home improvement industry. The global smart home market is expected to reach $338.28 billion by 2030, exhibiting a CAGR of 20% during the forecast period.
Given the industry’s encouraging prospects, let’s look at the fundamentals of the best three Home Improvement & Goods stocks, beginning with the third choice.
Stock #3: Hooker Furniture Corporation (HOFT)
HOFT designs, manufactures, imports, and markets residential household, hospitality, and contract furniture. The company operates through Hooker Branded; Home Meridian; and Domestic Upholstery segments. It offers home entertainment, home office, accent, dining, and bedroom furniture under the Hooker Furniture and the Hooker Upholstery brands.
On December 5, HOFT declared a quarterly cash dividend of $0.23 per share, paid on December 29, 2023, to shareholders of record on December 15, 2023. This represents a $0.01 per share or 4.5% increase from the previous quarterly dividend. The dividend increase reflects the company’s robust capital structure and its ability to provide stable growth in the long run.
HOFT pays an annual dividend of $0.92, which translates to a yield of 3.67% at the current share price. Its four-year average dividend yield is 3.57%. Moreover, the company’s dividend payouts have increased at a CAGR of 10.5% over the past three years. HOFT has raised its dividends for eight consecutive years.
In terms of forward EV/Sales, HOFT is trading at 0.67x, 44.9% lower than the industry average of 1.22x. Also, the stock’s forward Price/Sales multiple of 0.58 is 35.5% lower than the industry average of 0.90. Likewise, its forward Price/Book of 1.19x is 51.6% lower than the industry average of 2.46x.
HOFT’s trailing-12-month levered FCF margin of 18.16% is significantly higher than the respective industry averages of 5.36%. Likewise, the stock’s trailing-12-month asset turnover ratio of 1.24x is 24.9% higher than the industry average of 0.99x.
In the fiscal 2024 third quarter that ended on October 29, 2023, HOFT reported net sales of $116.83 million. Its gross profit increased 5.3% year-over-year to $33.71 million. The company’s operating income came in at $8.77 million, up 36.6% from the prior year’s quarter.
In addition, the company’s net income and EPS were $7.04 million or $0.65 per share, increases of 45.4% and 54.8%year-over-year, respectively. Its cash and cash equivalents stood at $39.79 million as of October 29, 2023, compared to $19 million as of January 29, 2023.
Street expects HOFT’s revenue and EPS for the first quarter (ending April 2024) to increase 5.5% and 269.2% year-over-year to $128.47 million and $0.48, respectively. For the fiscal year (ending January 2025), the company’s revenue and EPS are expected to grow 12.2% and 43.6% year-over-year to $515.92 million and $2.08, respectively.
Shares of HOFT have surged 13.3% over the past six months and 20.6% over the past year to close the last trading session at $24.05.
HOFT’s robust outlook is reflected in its POWR Ratings. 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, each weighted to an optimal degree.
The stock has a B grade for Growth and Momentum. Within the B-rated Home Improvement & Goods industry, HOFT is ranked #17 of 57 stocks.
Click here to access additional ratings of HOFT for Sentiment, Value, Stability, and Quality.
Stock #2: Mohawk Industries, Inc. (MHK)
MHK designs, manufactures, sources, distributes, and markets flooring products for residential & commercial remodeling and new construction channels internationally. The company operates through three segments: Global Ceramic; Flooring North America; and Flooring Rest of the World (Flooring ROW).
In terms of forward non-GAAP P/E, MHK is trading at 10.77x, 31.1% lower than the industry average of 15.63x. Further, the stock’s forward EV/Sales multiple of 0.79 is 35.2% lower than the industry average of 1.22. Likewise, its forward Price/Sales of 0.56x is 37.7% lower than the industry average of 0.90x.
MHK’s trailing-12-month EBITDA and levered FCF margin of 11.98% and 7.70% are higher than the respective industry averages of 10.97% and 5.36%. Also, the stock’s trailing-12-month CAPEX/Sales of 4.68% is 53.5% higher than the industry average of 3.05%.
MHK’s revenue and EBIT have grown at respective CAGRs of 6.2% and 2.1% over the past three years. The company’s tangible book value has improved at CAGR of 4.2%.
For the third quarter that ended September 30, 2023, MHK reported net sales of $2.77 billion, while the company’s gross profit was $692.01 million. Its adjusted net earnings attributable to Mohawk Industries, Inc. was $173.66 million, or $2.72 per share, respectively.
In addition, the company’s free cash flow came in at $384.61 million, up 414.7% from the prior year’s quarter. The company’s cash and cash equivalents as of September 30, 2023, were $518.45 million, compared to $326.97 million as of October 1, 2022.
Analysts expect MHK’s EPS for the fourth quarter (ended December 2023) to increase 40.5% year-over-year to $1.85. For the fiscal year 2024, the company’s EPS is expected to grow 8.6% year-over-year to $9.88. Furthermore, MHK has surpassed consensus EPS estimates in each of the trailing four quarters.
MHK’s stock declined 5.7% over the past month to close the last trading session at $97.57.
MHK’s POWR Ratings reflect its bright prospects. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
MHK has an A grade for Momentum and a B for Growth and Value. It is ranked #16 out of 57 stocks in the B-rated Home Improvements & Goods industry.
In addition to the POWR Ratings we’ve stated above, we also have MHK ratings for Sentiment, Stability, and Quality. Get all MHK ratings here.
Stock #1: HNI Corporation (HNI)
HNI manufactures, sells, and markets workplace furnishings and residential building products primarily in the United States and Canada. The company operates through two segments: Workplace Furnishings and Residential Building Products. It offers a range of commercial and home office furniture, including panel-based and freestanding furniture systems.
On June 1, 2023, HNI completed the acquisition of Kimball International, Inc. (KBAL), a leading commercial furnishings company with expertise in workplace, health, and hospitality.
The combined companies will create a market leader with a proforma revenue of approximately $3 billion and combined EBITDA of nearly $305 million, including $25 million of synergies anticipated to be fully recognized within three years of closing. The combination will have an unmatched comprehensive product offering driving HNI’s growth and profitability.
On November 12, HNI’s Board of Directors declared a quarterly dividend of $0.32, paid on December 1, 2023, to shareholders of record at the close of business on November 20, 2023.
HNI pays an annual dividend of $1.28, which translates to a yield of 3.10% at the current share price. Its four-year average dividend yield is 3.73%. Moreover, the company has raised its dividends for 13 consecutive years.
In terms of forward non-GAAP P/E, HNI is trading at 16.79x, 10.7% lower than the industry average of 18.80x. Also, the stock’s forward EV/Sales multiple of 1.04 is 41.7% lower than the industry average of 1.79. Its forward Price/Sales of 0.79x is 44.6% lower than the industry average of 1.42x.
HNI’s trailing-12-month gross profit margin of 38.39% is 26.4% higher than the respective industry averages of 30.38%. Likewise, the stock’s trailing-12-month return on total capital of 8% is 13.4% higher than the industry average of 7.06%.
HNI’s revenue and EBITDA have grown at respective CAGRs of 5% and 3.8% over the past three years. The company’s EBIT has increased 3.8% over the same timeframe, while its total assets have improved at a CAGR of 13.6%.
During the third quarter that ended September 30, 2023, HNI’s net sales increased 18.8% year-over-year to $711.60 million. Its non-GAAP gross profit rose 34.1% from the year-ago value to $285.60 million. Also, the company’s non-GAAP operating income came in at $65.20 million, an increase of 61.2% year-over-year.
In addition, HNI’s non-GAAP earnings per share rose 31% from the prior year’s period to $0.93. As of September 30, 2023, the company’s cash and cash equivalents came in at $24.4 million versus $17.4 million as of December 31, 2022.
Analysts expect HNI’s EPS to grow 30.9% year-over-year to $0.83 for the fourth quarter that ended December 2023. The company’s revenue is expected to increase 20.4% year-over-year to $684.85 million for the same period. Moreover, the company has an impressive earnings surprise history as it surpassed consensus EPS estimates in all four trailing quarters.
Over the past six months, the stock has gained 42.2% and 37.9% over the past year to close the last trading session at $40.86.
HNI’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall grade of B, equating to a Buy in our proprietary rating system.
HNI has an A grade for Growth and Sentiment. The stock has a B grade for Momentum and Quality. It is ranked #7 among 57 stocks within the B-rated Home Improvement & Goods industry.
Other ratings for HNI of Value and Stability are also provided; click here to check.
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MHK shares were trading at $98.35 per share on Thursday morning, up $0.78 (+0.80%). Year-to-date, MHK has declined -4.98%, versus a 2.54% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
Top 3 Home Improvement Stocks for 2024 Growth StockNews.com
