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Cash Generation Will See Hooker Furniture Corp. (HOFT) Through the Recession

What should investors do with stocks from the Furniture & Fixtures Industry? The credit crisis, spate of foreclosures, and looming prospects of a recession make it nearly impossible to predict that 2008 will be a star year for any part of the Consumer Cyclical Sector. This is the trend of populist stock market thinking anyway. In spite of that, there are superior stock values to be captured in this pessimistic investing environment. Here is a small capital stock with a big-time benefit potential.

This stock grabs attention by the fact that profits have improved on lower sales. This is a reliable sign that the management is capable of dealing with temporary downtrends in demand. High cash generation will keep the company poised to take best advantage of eventual economic improvement.

The company has undertaken a set of three key moves designed to deal with difficult operating conditions. First, it has dedicated resources to increase business with selected clients. Secondly, it has invested in inorganic growth to expand the product range. Finally, it has strengthened logistics in hitherto under-represented business territories. It is also significant that the board of directors has set aside $10 million to buy back common stock.

The Price to Earnings Ratio has never crossed 20 for this stock in the past five years. This is against over 30 for the industry in which it operates. This ratio has been below 14 for the stock over the last four quarters. It seems opportune, from a formal classic investment perspective, to consider analyzing this stock at this juncture.

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