Natuzzi (NTZ) is a logical choice for contrarian and value investors. I calculate its value to be roughly $18.
Contrarian NTZ is less than 50% of the average of its high and low over the last 10 years. In 1997, it reached a high of about $28 and in 1993 hit a low of about $8. If this average price is a reasonable approximation of fair value, it has 100% on the upside.
Value The upside potential is supported by its value. At $8, NTZ is trading at a price/book ratio of 0.78, compared to an average of 2.93 in the Home-Furnishings-and-Fixtures Industry. Its price/sales ratio is 0.53. A price/earnings ratio is not currently available from Yahoo! But using the average net profit margin of the industry of 4.3% to caluculate price/earnings, produces a p/e of 11.3. This compares favorably with the industry average of 18.5.
Granted it is likely to take a few years to get to $18. But if it takes 3 years to double, that works out to an annualized compound rate of return of 26%. If it takes 5 years, it still works out to 15%.
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Every furniture-related name is getting crushed today on La-Z-Boy's abysmal report. Their comments suggest that the whole industry is in trouble, so every stock is down 3%+ already (LZB, FBN, and ETH). How is NTZ going to escape an industry-wide downdraft?
Sorry boys. it may be a buy later, but today isn't a day to be a hero. I'm selling.