Build A Comfortable Portfolio With Ethan Allen Interiors
Ethan Allen Interiors (NYSE: ETD) is one of the best-positioned stocks in an industry experiencing strong secular tailwinds. While others in the industry are hindered or struggling with supply chain issues and shipping disruptions Ethan Allen Interiors has been quietly expanding its North American footprint, a footprint that generates more than 75% of its inventory and one that relies heavily on its own trucks. This has the company outperforming on all levels and widening margins which is what we want to see. Add to this the stocks ultra-low 8X P/E ratio and remarkably safe 4.88% yield and we think you can understand why we like this stock.
And, according to the data from Insidertrades.com, the insiders and institutions like this stock too. Insiders hold more than 11% while the institutions account for the other 89%. This means there are very few if any, shares available that aren’t being sold short which is a recipe for a short-squeeze. The short-interest is sitting at close to 9% which isn’t ridiculously high but high enough to spark a substantial increase in share prices given the right conditions.
Ethan Allen Interiors Crushes Consensus And Moves Higher
Ethan Allen Interiors had a very strong quarter in which demand and pricing increases drove revenue to a record high. The revenue of $208.1 million is also up 16% over last year, 19.2% versus two years ago, and beat the consensus estimate by more than 1100 basis points. The revenue was driven by a 25% increase in retail sales coupled with a 14.2% increase in Wholesales with selective price increases in both categories aiding the top line.
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Moving down, the company widened the gross margin by 210 basis points and reduced SG&A expenses as well which resulted in a strong bottom-line result as well. The GAAP $1.05 is impacted by the sale of real estate but the adjusted results are just as strong. The adjusted $0.95 is up $0.26 from last year and beat the consensus by $0.19.
The company didn’t give any formal guidance but demand trends, written orders, and inventory suggest the second half of the year will be just as strong. Wholesale written orders are up 1.7% over last year and 30.3% over F2020 while Retail written orders are down -0.2% YOY but up 44% in the 2-year stack.
Ethan Allen Interiors Pays A Very Comfortable Dividend
When we say that Ethan Allen pays a very comfortable dividend we don’t just mean the yield. While the 4.88% yield is compelling enough it is the safety and outlook for growth that really excites us. Not only is the payout ratio running in the 35% range in regards to our outlook for earnings there is upside risk in that outlook and the balance sheet is a fortress for fortress balance sheets to envy. The company has no debt and rising cash in the face of expansion and increasing inventory. In our view, the company may not increase at a robust pace but we are expecting the random odd special dividends that have been paid in the past.
The Technical Outlook: Ethan Allen Interiors Moves Up From Support
Shares of Ethan Allen Interiors have been bobbing along at a key support level for the last few quarters and may be ready to break out of that range. Price action has recently established a new, higher support level within that range and is moving up from that level in the wake of the earnings report. The move is supported by a potentially bullish set-up in the indicators that could lead to an upward swing in momentum and a sustained period of buying. In our view, the value/yield aspect of the stock is very compelling and should attract new buyers over the course of the year for that reason alone.
Companies in This Article:
| Company | Current Price | Price Change | Dividend Yield | P/E Ratio | Consensus Rating | Consensus Price Target |
|---|
| Ethan Allen Interiors (ETD) | $31.66 | +2.0% | 4.55% | 10.15 | Moderate Buy | $35.00 |
Experience
Thomas Hughes has been a contributing writer for InsiderTrades.com since 2019.
Areas of Expertise
Technical analysis, the S&P 500; retail, consumer, consumer staples, dividends, high-yield, small caps, technology, economic data, oil, cryptocurrencies
Education
Associate of Arts in Culinary Technology
Past Experience
Market watcher, trader and investor for numerous websites. Founded Passive Market Intelligence LLC to provide market research insights.
