The increased urbanization, government initiatives, and rising consumer spending is helping the home improvement industry grow. So, investors could look to buy fundamentally solid home improvement stocks, Snap-on Incorporated (SNA), Tile Shop Holdings, Inc. (TTSH), and Flexsteel Industries, Inc. (FLXS).
The Biden administration announced $837 million in grants and loan subsidies to fund energy-efficient and climate-resilient improvements to low-income multifamily housing. Building owners will be able to fund upgrades such as electric heat pumps, solar panels, and energy-efficient windows under the Green and Resilient Retrofit Program (GRRP).
Moreover, the global home improvement services market is expected to grow to $423.90 billion in 2027 at a CAGR of 5%. Technological advancements such as visualization apps and 3D software and increasing demand for home remodeling are expected to drive the growth of the home improvement services market.
In addition, the DIY home improvement industry in the United States is expected to expand at a CAGR of 6.1% until 2026.
Let’s delve deeper into the fundamentals of the stocks mentioned above.
Snap-on Incorporated (SNA)
SNA produces and sells tools, equipment, diagnostics, and repair information and systems to professionals worldwide. It operates in four segments: Commercial & Industrial, Snap-on Tools, Repair Systems & Information, and Financial Services.
In terms of forward non-GAAP P/E multiple, SNA is trading at 14.79 is 10.1% lower than the industry average of 16.44. In addition, SNA’s forward EV/EBIT of 11.03x is 24.8% lower than the industry average of 14.67x.
SNA’s trailing-12-month EBIT margin of 25.89% is 168.5% higher than the industry average of 9.64%. Its trailing-12-month EBITDA margin of 27.67% is 109.2% higher than the industry average of 13.23%.
For the first quarter that ended April 1, 2023, SNA’s net sales increased 7.8% year-over-year to $1.18 billion. Its operating earnings increased 11.1% from the year-ago value to $326.10 million. Also, its net income and EPS came in at $248.70 million and $4.60, up 14.4% and 15% year-over-year, respectively.
The consensus revenue estimate of $4.67 billion for the year ending December 2023 represents a 3.8% increase year-over-year. Its EPS is expected to grow at 3.5% year-over-year to $17.41 for the same period. It surpassed the EPS estimates in all four trailing quarters. SNA’s shares have gained 15.3% over the past year to close the last trading session at $257.53.
SNA’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
SNA has an A grade for Quality and a B for Stability and Momentum. Within the B-rated Home Improvement & Goods industry, it is ranked #4 out of 56 stocks. Click here for the additional POWR Ratings for Growth, Value, and Sentiment for SNA.
Tile Shop Holdings, Inc. (TTSH)
TTSH is a specialty retailer that sells natural stone and man-made tiles, setting and maintenance materials, and related accessories. The company offers natural stone products under the Rush River and Fired Earth brands; and manufactures setting and maintenance materials under the Superior brand name.
TTSH’s trailing-12-month EV/Sales multiple of 0.90 is 19.3% lower than the industry average of 1.12. Its trailing-12-month Price/Sales multiple of 0.53 is 35.8% lower than the industry average of 0.83.
Its trailing-12-month gross profit margin of 65.35x is 85.9% higher than the 35.15x industry average. Its trailing-12-month ROCE of 12.41% is 15.9% higher than the 10.71% industry average.
TTSH’s total liabilities and net long-term debt amounted to $223.44 million and $25 million for the period that ended March 31, 2023, compared to $11.15 billion and $45.50 million for the period ended December 31, 2022, respectively.
Analysts expect TTSH’s revenue to increase 2.8% year-over-year to $408.61 million in 2024. Its EPS is expected to grow 19.1% to $0.25 in 2024. It surpassed EPS estimates in three of four trailing quarters. The stock has gained 15.3% over the past nine months to close its last trading session at $4.75.
It’s no surprise that TTSH has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Quality. It is ranked #5 in the same industry.
Beyond what is stated above, we’ve also rated TTSH for Value, Growth, Stability, Sentiment, and Momentum. Get all TTSH ratings here.
Flexsteel Industries, Inc. (FLXS)
FLXS, together with its subsidiaries, operates as a manufacturer, importer, and online marketer of upholstered furniture for residential and contract markets in the United States.
FLXS’s forward Price/Cash Flow multiple of 2.08 is 80% lower than the industry average of 10.42. Its forward Price/Sales multiple of 0.23 is 72.8% lower than the industry average of 0.83.
FLXS’s trailing-12-month asset turnover ratio of 1.48x is 47% higher than the 1.01x industry average. Its trailing-12-month levered FCF margin of 8.55% is 200.3% higher than the 2.85% industry average.
FLXS’s operating income came in at $6.31 million for the nine months that ended March 31, 2022, up 106.7% year-over-year. Its net income increased 117.4% year-over-year to $4.62 million. Also, its EPS came in at $0.85, up 174.2% year-over-year.
Street expects FLXS’s revenue to increase 7.8% year-over-year to $421.73 million in 2024. Its EPS is expected to grow 137.5% year-over-year to $1.90 in 2024. It surpassed EPS estimates in three of four trailing quarters. Over the past six months, the stock has gained 17% to close its last trading session at $17.14.
FLXS’s POWR Ratings reflect its solid prospects. The stock has an overall A rating, translating to Strong Buy in our proprietary rating system.
It also has an A grade for Value and Sentiment and a B grade for Growth. It is ranked #3 within the same industry. Click here to see the additional ratings for FLXS (Stability, Momentum, and Quality).
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SNA shares were trading at $261.51 per share on Thursday morning, up $3.98 (+1.55%). Year-to-date, SNA has gained 15.21%, versus a 9.56% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions. More...
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