Last week, Foolish colleague Rich Smith scoped out Stanley Furniture (NASDAQ:STLY) to see what analysts were expecting from the company before its earnings release. He also commented on Stanley's recent operational superiority over fellow Motley Fool Hidden Gems selection Hooker Furniture (NASDAQ:HOFT). Stanley's newest results are evidence that it still has the edge over its struggling competitor.

The company's third-quarter net sales grew 8.6% to $85.6 million, edging out the upper range of its guidance. Compare that with Hooker's 2.3% decline in revenue in the most recent quarter.

Stanley's operating profit margins of 11% remained consistent with the same period a year ago. Net income increased 9.4% to $0.44 per share. Unfortunately, this comes in at the low end of its guidance of $0.44 to $0.47 per share.

As Rich pointed out, analysts were a bit more optimistic about Stanley's prospects for this quarter. Analysts were looking for $0.47 in earnings from $85.7 million in revenue. Stanley has fallen short on both counts, and the report suggests that it too was expecting more out of the period.

CEO Jeffrey Scheffer said, "We believe industry sales growth slowed during the third quarter and is in an uncertain period . " This indicates to me that Stanley was looking for a better consumer-friendly environment this quarter. Scheffer went on to say that because of this soft spot, it has lowered sales and earnings forecasts for the fourth quarter.

Accounting for its revised estimates, Stanley will likely earn about $1.71 per share for the year, which would amount to 7.5% growth in EPS from fiscal 2004. At a price-to-earnings ratio of 13.3, even after the recent declines in the stock, there is still little room for error when buying at this level.

A clean balance sheet, a nice dividend, and leadership that is doing a good job of keeping inventory levels in check are all reasons to have some peace of mind. But a Foolish investor may want a better deal on Stanley's stock with the sector encountering a tougher sales environment.

Fool contributor Jeremy MacNealy does not own shares of any companies mentioned.