Why Ethan Allen Shares Soared

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of home furnishings company Ethan Allen Interiors (NYSE: ETH  ) spiked 23% today, after its quarterly profit easily topped Wall Street expectations.

So what: Ethan Allen's first-quarter beat was so wide -- adjusted EPS of $0.35 versus the consensus of just $0.25 -- that analysts have no choice but to raise their valuation estimates. Although total revenue only increased 1.4%, same-store sales growth of 5%, coupled with stronger gross margins, is triggering plenty of investor optimism over profitable growth going forward.

Now what: Don't expect Ethan Allen's operating momentum to wane anytime soon. According to CEO Farooq Kathwari:

Our competitive advantages arise from providing high quality products of the finest craftsmanship, offering complimentary design service through our 2,000 motivated interior design professionals, giving free local delivery, enhancing our technology in all aspects of the business, and through leveraging our vertically integrated structure.
While economic conditions continue to be challenging, we remain cautiously optimistic about our future prospects.

Of course, with the stock soaring to a new 52-week high today, and trading at a forward P/E of roughly 20, much of that optimism might already be baked into the price.

Interested in more info on Ethan Allen? Add it to your watchlist.

Fool contributor Brian Pacampara has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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