Benchmark analyst Michael Legg initiated coverage on the shares of Haverty Furniture Companies Inc (NYSE:HVT) with a Buy rating and announced a price target of $41.
HVT is a family-controlled furniture retailer in the Southeast, operating 123 stores in 16 states.
After strong sales during COVID, current financial metrics are clouded and not fully understood by investors on return to a more normal operating environment, opined the analyst.
While comps look weak, they actually are cycling against abnormally high revenue growth related to COVID and compare favorably versus pre-pandemic levels, said the analyst.
According to the analyst, internal initiatives, including expanded design services and a more robust online presence, result from pandemic pressures that have led to improved margins.
The analyst said that furniture sales are tied to housing statistics. While national housing trends have deteriorated, Haverty’s key states, including Texas and Florida, show positive migration trends.
The analyst believes investment in HVT represents a relatively safe haven for retail exposure given the current economic backdrop, whereby inflation is impacting consumer purchasing power amidst a slowing real estate cycle.
The analyst listed the company has over $100 million of cash on its debt-free balance sheet, estimated FCF of $67 million for 2024, a longstanding dividend, and a current stock buyback in place.
The analyst believes the company’s debt free balance sheet, significant free cash flow, and continually refined operations, combined with its current valuation, represent an attractive investment thesis for the stock.
Further, the analyst added that migration to HVT’s southeast market bucks national housing trends and big box retail bankruptcies present opportunistic growth opportunities.
Price Action: HVT shares are trading higher by 3.9% at $31.94 on the last check Tuesday.
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