For so long now, the furniture retail industry has seemed to be jinxed. OK, so maybe it has something to do with a wrecked housing market. But over the past two months, companies such as Stanley (NASDAQ:STLY), Hooker Furniture (NASDAQ:HOFT), Bassett (NASDAQ:BSET), Natuzzi (NYSE:NTZ), and La-Z-Boy (NYSE:LZB), weeped in sorrow as their top lines got a whippin'. Until yesterday, that is, when Ethan Allen (NYSE:ETH) reported that it sold more furniture in its most recent quarter than it did one year ago.

Granted, not a lot more. But on Wednesday, Ethan Allen did report a year-over-year sales increase in sales of 2.4% -- and $0.57 per share in profits to boot. For the record, that was about 119% more than Ethan Allen earned during fiscal Q1 2007, when profits were dampened by a restructuring and impairment charge.

Characteristically understated in assessing the quarter, CEO Farooq Kathwari said he was "pleased" with the firm's ability to increase both sales and profits in the face of "continued uncertainty with respect to the economy, concerns with respect to the consumer credit situation, and a softer overall environment for home furnishings retail." However, he immediately doused any investor hopes that the furniture industry might be turning around by observing that sequentially, September's sales were worse than August's.

Profits, check. How about cash?
Here's the cash. The mainstream media will certainly focus on the headline numbers at Ethan Allen -- its GAAP earnings. Here at the Fool, we care more about cash profits. Fortunately, Ethan Allen had those in spades. Earning $17.5 million net profit for the quarter, management generated nearly two thirds more in free cash flow -- $29 million.

Thinking its shares are undervalued, management spent all of that cash, and more, buying back its own shares last quarter. In total, Ethan Allen bought back 1.1 million shares for $38.3 million (sadly, paying $33.50 per stub -- more than the shares are worth today). With authorization from his board to buy back up to 2.1 million more, and plenty of cash in the kitty to fund the buybacks (more than $133 million at last count), it's safe to assume Kathwari will use the price weakness to buy more shares this quarter as well.

Should you buy it, too?
You could, but I wouldn't advise it. With a trailing P/E of 15, and profits expected to grow in the single digits annually over the next five years, the shares still look too expensive.

Do you enjoy horror movies? Do you rubberneck at car crashes? Then you're going to love reading about Ethan Allen's rivals:

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.