Italian leather. Those words conjure up images of luxury, high price tags cash flow? They do for one company at least: Italian leather furniture maker Natuzzi (NYSE:NTZ).

As promised in October, the company reported its third-quarter 2004 earnings on Monday. But unlike its first-half results, you won't find the Q3 numbers on's company "News" page. For whatever reason, Natuzzi played its numbers close to its vest this week, and to see what they were, this Fool had to travel to its website and dig up the results there.

On the surface, the results weren't exactly bellisimo. On a euro basis, quarterly sales were down nearly 5% year-on-year. Gross margins were essentially unchanged. Net profits fell 20%.

Year-to-date sales were almost absolutely flat. Although gross margins increased 280 basis points to 36.5% and operating margins inched up 90 basis points to 6.6%, a decline in the dollar-to-euro exchange rate made dollar-denominated sales of its furniture worth less this year than last, contributing to an 8% decline in net earnings before taxes. And speaking of taxes, Natuzzi's tax liability has shot up more than 26% this year. The final result was a nearly 18% decline in net earnings (excluding currency-rate fluctuations, the decline would still have been bad, but not quite so bad, at about 10%).

Free cash flow tipped the scales at 41.7 euro for the first three quarters of 2004, in contrast to last year's negative 13.8 million euro. And 90% of that cash went directly into the company's coffers, ballooning Natuzzi's net cash (after long-term debt) to 97 euro (or about $125 million.)

Natuzzi's business does not appear to be particularly seasonal, so I'm comfortable using a run rate to project its free cash flow through the rest of the year -- and something along the lines of $70 million looks achievable. Compare that to the company's enterprise value of less than $425 million, and Natuzzi scores an EV/FCF ratio of 6. That compares favorably to companies such as Hidden Gems favorites Hooker Furniture (NASDAQ:HOFT) and Stanley Furniture (NASDAQ:STLY) (with EV/FCF ratios of 21 and 55, respectively).

On the other hand, Hooker and Stanley both sport returns on equity two or more times as high as Natuzzi's (one reason they were picked as gems in the first place), and neither one has suffered the Italian company's 50% decline in GAAP earnings over the past fiscal year. Given its blemishes, it's understandable that Natuzzi's stock has been piled up in the "as is" room. But with its sofa cushions stuffed with cash, Natuzzi is one furniture maker that's worth a second look.

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Fool contributor Rich Smith has no interest in any of the companies mentioned in this article.