Valuation Scorecard: Stock Rating C-Neutral (2/26/24)-Haverty Furniture Cos Inc (HVT).

Over the next 6 years, Haverty Furniture shares will need to reach $59 to achieve average annual stock market performance of 9.0%. Haverty Furniture’s stock price will need to reach $69 by 2028 to achieve upper quartile performance. As reflected at the current price of $35, what future Haverty Furniture operating performance is the market anticipating?

Executive Summary

• Price Target Research identifies Haverty Furniture as having: very high profitability, high expected growth, stability, and above average financial strength. A big positive influence on Haverty Furniture’s valuation is its superior Profitability.
• Very high valuation, above market shareholder returns. Current valuation levels are very high relative to the Haverty Furniture Peer Group. Recent market returns have outperformed the Haverty Furniture Peer Group. Total shareholder returns expected to significantly beat the overall equity market. Based on current investor expectations, Haverty Furniture shares should reach a level of $90 by 2028 — an 22.8% per year total shareholder return. A 2028 stock price of $59 would reflect median performance and a price of $69 would be required to reach upper quartile performance.
• Haverty Furniture’s past growth is very high. Historical growth has been very high relative to the Haverty Furniture Peer Group and forecasted growth is relatively very high. Equity Growth, EPS Growth, and Revenue Growth have been superior. These factors have buoyed market perceptions of Haverty Furniture. Haverty Furniture’s historical income statement growth and balance sheet growth have diverged. Revenue growth has paralleled asset growth; earnings growth has exceeded equity growth resulting in an improving return on equity. Haverty Furniture’s consensus growth expectations are lower than historical growth.
• Profitability has been Haverty Furniture’s biggest valuation strength. Return on Equity, Pretax Margin, and Pretax ROA are group leading. These factors have strengthened market perceptions of Haverty Furniture. The company has very high excess cash and will have to work to reinvest at attractive returns to support profitability and valuation.
• Haverty Furniture’s risk profile is favorable. Overall variability has been above average with above average revenue variability, relatively low E.P.S. variability, and above average stock price volatility. Financial Strength is only average and earnings’ expectations are relatively high. The debt/capital ratio has been relatively steady.

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