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Ethan Allen Interiors Inc. ETH is a home furnishings retailer that also provides interior design services. The stock has been on an impressive run in the last year and in 2021 and it is set to benefit from housing market growth and home spending. Plus, it is trading for under $30 a share and boasts a strong dividend yield.
Ethan Allen’s FY20 sales (period ended on June 30) fell 21%, with the downturn driven by coronavirus setbacks. But the company has turned things around and its stronger-than-projected guidance that it provided in late January helps it land a Zacks Rank #1 (Strong Buy) right now.
Zacks estimates call for ETH’s fiscal 2021 revenue to jump by 14%, with FY22 set to climb another 6% to reach $708 million. At the bottom end, its adjusted earnings are expected to soar 244% in FY21 to hit $1.79 a share and climb 6% higher in FY22.
Ethan Allen also earns “B” grades for Growth and Value in our Style Scores system and it trades at a discount to its Retail-Home Furnishings space that is in the top 2% of our over 250 Zacks industries. This group includes Williams-Sonoma WSM, RH RH, Tempur Sealy TPX, and others. All of these companies are prepared to benefit from the continued growth of the housing market, which is now being driven by millennials, and broader home improvement spending.
ETH has soared 120% since last March. More recently, the stock has surged 30% in the past three months to blow away the S&P 500’s 4% and top its peers.
Despite its climb, the stock trades at $27 a share. And a recent pullback has Ethan Allen sitting 10% below its March 18 highs and it still has 30% more room to run before it reaches where it was back in 2016. The downturn has also pushed it near neutral levels in terms of RSI at 52.
Last year, Ethan Allen lifted its quarterly dividend by nearly 20%. And its current 3.8% dividend yield more than doubles the S&P 500’s 1.4% and crushes the recently rising 10-year U.S. Treasury’s 1.6% and the 30-year Treasury’s 2.3%. And the company ended Q2 “with a strong balance sheet, including cash on hand of $80 million and no outstanding debt.”
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