Home improvement-cum-building product maker-cum-Motley Fool Income Investor recommendation Masco (NYSE:MAS) closed out the trading week with a whimper on Friday, cutting a nickel from its annual profits forecast. Old range: $1.60-$1.70. New range: $1.55-$1.65.

Costs of "plant start-up, severance, systems implementations and other initiatives" weren't behind the reduced guidance -- those had already been announced as amounting to $0.12 for the year. Rather, Masco attributed the reduction entirely to its belief that housing starts this year will approximate 1.35 million, 50,000 fewer than previously believed.

And yet, even after the reduced guidance, Masco doesn't look terribly expensive. Taking the midrange of guidance, $1.60 per share, the stock is selling for about a 15 P/E -- not unreasonable when weighed against expected 12% long-term profits growth. More importantly, unless the guidance drawback unduly affects cash flow, the stock looks pretty attractive when valued as a ratio of price-to-free cash flow. The $927 million in FCF that Masco generated over the last year has the firm trading at less than 10 times this number, and if it manages to translate expected profits growth into similar growth in free cash flow, that could make for one heck of a bargain.

Of course, there is a flip side to this story. One of Masco's nickels has turned out to be wooden. The direction of the housing market isn't hazy, and if housing starts continue to slip, we could see more of the firm's projected coinage turn out to be similarly worthless. With 40% of its revenues tied to the new-housing market, a few more rounds of data suggesting the bubble still hasn't completely deflated would be bad news for Masco shareholders, and also for investors in competing firms like American Woodmark (NASDAQ:AMWD) and Fortune Brands (NYSE:FO) in cabinetry, and American Standard (NYSE:ASD) in fixtures.

The good news: We're already well over a year into the housing collapse, so investors are fully aware of the consequences companies are facing. Masco's trailing earnings (and cash flow) no longer reflect the absolute boom years of the housing market. Analysts projecting earnings growth for the company know this, and see the same housing starts numbers the rest of us see. Presumably, they've factored all this into their data modelings, and the 12% average long-term growth they foresee. While slower growth (or declines) could well continue this year and next, the flip side of this coin would be that farther down the road, Masco could do even better than 12% growth. The time to invest in Masco, though, is before that future growth gets priced into the stock.

Fool contributor Rich Smith does not own shares of any company named above. The Motley Fool has a disclosure policy.