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Is Ethan Allen Interiors a buy?

It’s time to take a look at an unpopular name within the markets. Here is a breakdown of $ETH, otherwise known as Ethan Allen Interiors.

Current Price: $19.18

52/Wk High: $19.39

52/Wk Low: $8.38

Market Cap: $480.5 Million

Dividend: $0.25 / 5.23% Yield

Read below for the breakdown!

Ethan Allen Interiors is a major interior design company, retailer, and manufacturer of furnishings for the home and office. The company does maintain a global reach and the majority of Ethan Allen’s product offerings are considered luxury furnishings.

Due to COVID-19, $ETH has had a wild ride, with production issues and sales challenges created by lockdowns and stay at home orders that derived from the pandemic.

Digging into the numbers Ethan Allen Interiors management has done an excellent job of managing the crisis all the while cleaning up the balance sheet.

Ethan Allen beat Q1 2021 expectations with an EPS of $0.360 versus the analyst’s consensus EPS estimate of $0.353. While EPS did improve, revenues declined as a result of the pandemic.

Ethan Allen’s management reported that net sales landed at $151.1 million, down 13.1% from the Q1 2020 net sales level of $173.9 million. On the bright side, the company noted this was solely due to COVID-19 and is not establishing a downward trend in sales.

Furthermore, gross margin improved throughout the quarter to 56.8%, even though the company faced a vast array of production challenges throughout the pandemic.

Adjusted operating margin also continued to improve, with the operating margin increasing to 8.1%, far better than the 7.0% adjusted operating margin in Q1 2020.

Breaking down Ethan Allen’s sales, retail written orders increased 10.8% while wholesale written orders declined 0.4%. The decline in wholesale orders was according to management related to GSA timing and government orders.

Another highlight for Ethan Allen was the elimination of all debt. Management noted that it’s remaining $50 million in debt was fully paid off and that the company ended the quarter with $62 million in cash on hand.

Finally, Cash provided by operating activities grew by a huge 80.3% to $42.2 million, a major factor in the company’s strength throughout Q1 of 2021.

Management noted the strength of the company.

“Our fundamentals continue to be strong, with retail written orders and backlogs reporting double-digit growth, both within our design centers and from e-commerce,” CEO Farooq Kathwari said.

Shifting into the balance sheet management has done a great job getting the company back in shape.

Total Debt: None

Total Liabilities: $188 million

Total Assets: $623 million

Cash & Short Term Inv: $62 million

As for valuation, Ethan Allen Interiors stock is trading at a premium.

Price to Earnings: 128.10x

Price to Sales: 0.85x

Price to Book: 1.44x

Price to Cash Flow: 8.86x

When it comes to management, leadership has done a solid job.

Return on Equity: 1.18%

Return on Assets: 0.65%

Return on Invest Capital: 0.89%

As for the analysts, currently, five analysts maintain a buy rating, four a hold rating, and just two analysts maintain a sell rating.

The big money is quite involved though, with 84.78% of Ethan Allen being owned by institutions. Top holders include BlackRock Institutional Trust, Dimensional Fund Advisors, and The Vanguard Group.

On a technical basis, $ETH could be flashing opportunity. According to the six-month charts, the MACD is trending downward within a very tight range around 0.4792.

The six-month charts are also indicating an RSI of 63.59 and CCI of 122, both of which are on the high end. It is also important to note that $ETH trades less than a point off its highs.

In short Ethan Allen Interiors is a promising recovery name with a solid amount of upside potential as well as a strong dividend.


Disclaimer: This is not direct financial advice, simply an opinion based on independent research.

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