Low-Price Guru Eyes Nova Lifestyle

03/11/2015 8:00 am EST


Our latest featured Company of the Month—which we discovered in our search for low-priced stocks—is a furniture maker looking to expand in China, notes Thomas Rice, editor of The Bowser Report.

Nova Lifestyle (NVFY) has a number of different brands of contemporary residential furniture, including Diamond Sofa, Colorful World, Giorgio Mobil, and Bright Swallow, which Nova Lifestyle acquired in April 2013.

Under these brands, the company manufactures and sells sofas, cabinets, and dining tables; its products are sold through stores and Internet sites in North America, China, and other international markets. North America accounts for 71% of total revenues.

However, the company is trying to expand its Chinese presence. Recently, the company announced the opening of seven franchise stores in China; the stores will open between May and November. Nova also announced four new products hitting IKEA stores in China.

Meanwhile, Nova Lifestyle is a growing company. Annual revenues rose from $28 million in fiscal 2010 to $78 million in fiscal 2013. Trailing 12 month sales are now $91 million.

After a hiccup in earnings growth in fiscal 2013, Nova Lifestyle was back to growing profits in fiscal 2014. For the first nine months of the fiscal year, net income was up 89%. Earnings for the three months ending last September 30, 2014, were up 156% compared to the year earlier period.

NVFY boasts a strong balance sheet to support its growing financials. The company has no long-term debt and a book value of $2.40, which is right around the stock’s price per share.

Less than a year ago, NVFY was trading above $8 per share. However, due to the drop in earnings in fiscal 2013, the share price slid.

At current levels, the stock is undervalued with a price to earnings ratio of 6.1, which is one of the lowest in the industry.

As the company's financials continue to grow, its stock price should rapidly increase, especially if its profit margins hold or expand.

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