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When Should You Buy Hooker Furniture Corporation (NASDAQ:HOFT)?

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·4 min read
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Hooker Furniture Corporation (NASDAQ:HOFT), which is in the consumer durables business, and is based in United States, saw a decent share price growth in the teens level on the NASDAQGS over the last few months. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s take a look at Hooker Furniture’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Hooker Furniture

Is Hooker Furniture still cheap?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Hooker Furniture’s ratio of 6.52x is trading slightly below its industry peers’ ratio of 6.64x, which means if you buy Hooker Furniture today, you’d be paying a decent price for it. And if you believe Hooker Furniture should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Furthermore, it seems like Hooker Furniture’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will Hooker Furniture generate?

NasdaqGS:HOFT Past and Future Earnings April 7th 2020
NasdaqGS:HOFT Past and Future Earnings April 7th 2020

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a relatively muted profit growth of 8.8% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Hooker Furniture, at least in the short term.

What this means for you:

Are you a shareholder? HOFT’s future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at HOFT? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on HOFT, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Hooker Furniture. You can find everything you need to know about Hooker Furniture in the latest infographic research report. If you are no longer interested in Hooker Furniture, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.