I love Italy. I spent a lot of my 20s living there, studying statues and learning the local curses between slices of potato pizza. So, when Italian leather sofa maker Natuzzi
Turns out my prejudice was misplaced. Natuzzi's latest full-year report shows no crazy messes. But on the other hand, the firm is not exactly living la dolce vita.
For the full year, net sales were down 4.4% to $871 million. Net profits sank nearly 60%, coming to $0.77 per share, that is, per American depositary receipt. In response, the firm has proposed cutting its dividend by more than half. This year, the greenback's precipitous drop punished the company's top line, but the flagging U.S. currency wasn't the only problem.
Natuzzi has China syndrome too, with inexpensive competition taking a bite of its market. That's a situation Fool furniture watchers know very well, since Hidden Gems pick Hooker Furniture
Here's the good news, though. The company has little debt, despite a spate of new store openings across Europe and even in China. Sales of its lower-level, introductory leather couches are growing at a 30% clip. It's a strategy similar to what is working for Bassett Furniture
At $10.50 a stub the trailing P/E ratio is around 13. The firm predicts 5% unit sales growth for the coming year, which would translate into 5% EPS growth. Given the firm's sketchy history with free cash flow, I wouldn't call it a screaming bargain, but value-minded investors with faith in the product and the concept would do well to keep this stylish stock on their watch lists.
Natuzzi is the kind of small, underwatched company that Tom Gardner examines in his Motley Fool Hidden Gems newsletter. Check it out, free, for 30 days.