Time to Dive Back In?

Riddle me this: What's worse than a bull in a china shop?

Answer: A bear in a furniture parlor.

It's been years since investors in the retail furniture industry have seen anything much resembling "good news." Wherever you look, it's doom and gloom, malaise and ... whatever rhymes with malaise.

As the housing market free-falls, dragging housing-related retailers like Lowe's (NYSE: LOW) and Home Depot (NYSE: HD) along for the ride, it seems no one has anything good to say about their businesses or their prospects. One of the best retailers in the business -- Motley Fool Stock Advisor recommendation Bed Bath & Beyond (Nasdaq: BBBY) -- reported just last week that it was only by virtue of tax breaks and share buybacks that it showed any profits growth at all.

Somebody turn on the lights
But you know what they say: It's always darkest before the dawn. Or as Foolish investors more poetically put it: Buy when there's blood in the streets. Sure, it's more fun to invest in stocks when everything is going up. But investors make their real money by buying on the cheap, and selling when their stocks turn skyward. (Buy low, sell high -- sound familiar?)

Investors looking to make real money in the market take a close look at stocks' book values for clues to finding a bargain. And as (bad) luck would have it, some of the lowest book values in the market are on offer right now in the furniture room. See for yourself:

	Price-to-Book	TTM P/E*	5-Year Growth Rate
Ethan Allen	2.08	10.88	8%
Hooker (Nasdaq: HOFT)	1.57	N/A	N/A
Stanley (Nasdaq: STLY)	1.25	24.15	7%
La-Z-Boy	1.00	N/A	4%
Furniture Brands (NYSE: FBN)	0.50	N/A	10%
Haverty (NYSE: HVT)	0.60	67.02	3%

Source: Yahoo! Finance. *Trailing-12-month price-earnings ratio.

With the average S&P 500 stock selling for a price-to-book value ratio of 2.85, these companies look priced to move. The "most expensive" stock of the bunch, Ethan Allen, still sells at a discount to the market's valuation. The "cheapest" -- Furniture Brands and Haverty -- seem to be selling for just pennies on the dollar.

But book value on its own doesn't necessarily help you tell a value from a value trap. Book value is, after all, one of those malleable GAAP concepts that can evaporate in an instant when a company writes down its assets. However, companies that increase their book value over several years, typically have a stock price that follows in the same direction.

That caveat helps us to separate the wheat from the chaff, because, if you track how these firms' book values have been moving over the past few years, you'll see that Ethan Allen's and La-Z-Boy's have actually declined over time. In contrast, tangible book value has been on the rise over the past five years at Furniture Brands, Hooker, Stanley, and Haverty.

Light bulb moment
It takes some digging, and some calculator-key punching, to see through these firms' P/E ratios -- all of which are at or above the level of the broader market -- to their true value. But once you do that, I think you'll agree that the book values look tempting.

At least one major investor agrees. Furniture Brands has been rumored to be in the sights of takeover artists for years. And late last year, we learned that Hong Kong-based Samson Holding had acquired a near-15% stake in the company, and approached management with a buyout offer in July -- sending the shares soaring to nearly $14. That offer was rebuffed, and as takeover hopes dimmed, shares of Furniture Brands sank toward where they sit today, just north of $8.

To me, that sounds like opportunity knocking. Answer the door.