Our latest featured recommendation is an 80-year-old furniture maker and retailer that is sprucing up its house, explains Linda McDonough, editor of the newly-launched advisory service, Growth Stock Strategist.

Ethan Allen (ETH) has been revamping its designs to attract new customers.

Its new four-part product cycle is in its final and most important phase. The new furniture lines place Ethan Allen squarely in the mindset of millennials.

The line will move Ethan Allen’s furniture along the style spectrum to casual, urban chic.  Stodgy colonial maple headboards are out and modern, curved-glass tables are in.

Ethan Allen’s earnings are starting to see the benefits. Despite a small 5% increase in revenue, net income in the December quarter exploded 50% thanks to improving profits for new products.

Earnings are expected to grow 30% this fiscal year (ending in June). A continuation of improving profits would allow Ethan Allen to grow earnings at least 20% next year.

Ethan Allen has invested heavily in interior designers—with 1,500 design consultants—who work with customers to choose products at no cost.

Ethan Allen’s makeover is much more than cosmetic. Besides introducing new products, the company has been fortifying its balance sheet and investing in manufacturing plants.

Debt has been steadily paid down, from $132 million last year to $58 million in the recent quarter.

Naturally, lower debt levels correspond to lower interest payments, boosting net income. Interest expense is one-quarter the level it was a year ago.

Chairman and CEO Farooq Kathwari has led Ethan Allen since 1985 and is its largest shareholder.

He is a strategic and conservative planner who resurrected the company from two years of losses after the financial meltdown.

A previous product revamp in 1994 propelled revenue and profits for more than 10 years. We expect his magic touch to bring the swag back to Ethan Allen’s profits.

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By Linda McDonough, Editor of Growth Stock Strategist

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