Furnish Your Portfolio With Bassett
Bassett Furniture (BSET) produces a wide assortment of furniture sold through its own stores as well as many of America's top retailers. It covers all major price points from entry level right through luxury brands.
The shares are quite volatile (beta = 1.35) which presents great opportunities for traders willing to buy low and sell high. Fiscal year 2021 (ended Nov. 30, 2021) marked a nice rebound for Bassett. When fourth-quarter results are announced (due very soon) estimates for the fiscal year 2021 are expected to have been about $1.75 per share.
Bassett shares peaked last May at $37. On Jan. 28, they were offered for just $13.71, a discount of almost 63% from last year's high. Better still, fiscal year 2022 results figure to be up, not down, versus 2021.
A typical multiple for Bassett has run about 17 times, accompanied by around 2.02% in current yield. At last Friday's quote, Bassett's valuations were astoundingly attractive at 6.6 times forward estimates while yielding 4.08%.
Simply reverting to a more normalized price-to-earnings ratio could easily send Bassett back up to north of $35 by this time next winter.
That goal is not far-fetched. Bassett peaked at $38.65 during 2015 on earnings per share of $1.88. It topped out at $41.30 in 2017 on earnings of $1.70 per share. Bassett fetched $37 last spring at 21.1 times last year's EPS.
I'm not alone in seeing huge upside here. Yahoo Finance calls the shares undervalued while calling for $34 within 12 months. Hitting its goal would deliver about 152% in total return based on a below historical average ending multiple of 16.3 times.
Quantitatively-based FastGraphs is more bullish than that. It sees a Nov. 30, 2022, fair value for Bassett as $36.71. Going out a further year FastGraphs thinks $41.63 is the proper target.
Independent research service Morningstar (MORN) agrees. Morningstar deigns to provide year-ahead targets but does let subscribers know what they see as present-day fair values for each stock they cover. For Bassett, that number sits at $33.96.
Barring a massive miss on projected earnings for 2022, Bassett seems almost certain to offer the chance to double or better from under $14.
Option writers looking to nibble on the edges might want to short some very conservative July 15 expiration date puts at $12.50 or $15 strike prices.
Actual pricing for those, with Bassett at $13.60, are shown below. If you choose to sell some be sure to use limit orders as they options trade very lightly.
Owning shares outright is the best way to capture Bassett's generous upside potential plus its greater than 4% current yield.
A tip of my hat to subscriber Owen Z. for asking me to take a look at this one.
Paul Price is long Bassett shares.