1. Flexsteel Industries, Inc.
Anthony Sorrentino
Ning wang
Presented November 1, 2016
Real Client Managed Portfolio

2. Real Client Managed Portfolio
Agenda
Current Holding and Company Profile
Business Overview
Industry Overview
Macroeconomic Overview and Drivers
Financial Analysis
Competitors
Valuation
Recommendation
Tony
Real Client Managed Portfolio

3. Current Holding and Company Profile
Historical Transactions and Valuations
2/25/ Bought 300 at $ 40.91
Current Price $41.90
Realized Return
3/16/16 Dividend Paid $0.18
6/22/16 Dividend Paid $0.18
9/21/16 Dividend Paid $0.20
Total: $0.56/$40.91 = 1.32% (HPR)
Unrealized Return
Price Appreciation: $41.90/$ = 2.42% (HPR)
52 Week Range:
Market Cap: $ million
Dividend Yield: 1.97% ($0.80)
paid since incorporation
P/E: 14.02
Source: Yahoo! Finance
Real Client Managed Portfolio

4. Real Client Managed Portfolio
Business Overview
Founded in 1901, incorporated in 1929
Manufactures, imports and sells residential and commercial furniture products in the United States
Sells to 50 countries around the globe and is carried by more than 1,200 retailers
Core Competencies include design and production of furniture for residential and commercial applications
Differentiation strategy aimed with the objective of selling higher priced, quality, made in USA furniture
Source: Official 10-K, Flexsteel.com
Real Client Managed Portfolio

5. Real Client Managed Portfolio
SWOT Analysis
Strengths
Design and production
No debt on balance sheet
Sophisticated logistics network
Weaknesses
Limited pricing power
No security of product design
Opportunities
New design and innovation
International expansion
Online sales growth
Threats
Macroeconomic uncertainty
Technologically advanced furniture
Competition from large retailers
Restrictions on trade
Changes in commodity prices
Real Client Managed Portfolio

6. Real Client Managed Portfolio
Industry Overview
Household Furniture Manufacturing industry is cyclical
Intensifying competition from imports which are expected to rise to cover 54.3% of domestic demand over the next 5 years
Revenue
$25 Billion
Annual Growth %
Annual Growth %
Profit
$1.2 Billion
Exports
$2.4 Billion
Businesses
9,593
Source: IBISWorld.com
Real Client Managed Portfolio

7. Porters Five Forces Analysis
Threat of New Entrants (MODERATE)
Power of Buyers (HIGH)
Power of Suppliers (LOW)
Threat of Substitutes (LOW)
Existing Rivalry (HIGH)
Medium capital requirements
Economies of scale
Low pricing power
Minimal product differentiation
Low switching costs
Low product differentiation
Undifferentiated products
Mostly raw materials
Many suppliers
No substitutes for furniture
Source: IBISWorld.com
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8. Macroeconomic Overview and Drivers
Source: IBISWorld.com
Real Client Managed Portfolio

9. Macroeconomic Overview and Drivers
Source: United States Census Bureau
Real Client Managed Portfolio

10. Real Client Managed Portfolio
Financial Analysis
Real Client Managed Portfolio

11. Real Client Managed Portfolio
DuPont Analysis
Real Client Managed Portfolio

12. Comparable Analysis- Competitors
Comparable Companies
Ticker
Stock Price
Market Cap. (million)
Description
Hooker Furniture Corp.
HOFT
$ 26.6
306.9
Operates as a home furnishing marketing, design, and logistics company worldwide. The company designs, manufactures, imports, and markets residential household furniture products. It operates through three segments: Case goods, Upholstered, and All Others.
Bassett Furniture Industries, Inc.
BSET
$ 24.22
261.6
Engages in the manufacturing, importing, and retailing of home furnishings in the United States. The company operates in three segments: Wholesale, Retail, and Logistical Services.
Kimball International, Inc.
KBAL
$ 12.77
481.7
Manufactures and sells furniture products in the United States and internationally. It offers furniture solutions, and accessories for office and open work space areas. The company markets and sells its products through sales representatives to end users, office furniture dealers, wholesalers, designers, and catalog houses.
La-Z-Boy Inc.
LZB
$ 25.17
1237.6
Manufactures, markets, imports, exports, distributes, and retails upholstery furniture products in the United States and internationally. It operates through Upholstery, Case goods, and Retail segments
Source: CapIQ
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13. Comparable Analysis- Competitors
Real Client Managed Portfolio

14. Comparable Analysis- Valuation
Implied Price: $45
Source: CapIQ
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15. Historical Revenue Growth
Cyclical trend
5-8 years a cycle
Stable trend
Stays between 20% to 25%
Source: CapIQ
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16. DCF Valuation - Assumptions
Source: Official 10-K
Real Client Managed Portfolio

17. Real Client Managed Portfolio
DCF Valuation
Implied Price: $38
Real Client Managed Portfolio

18. DCF Valuation – Sensitivity Analysis
Target Price Range : ($32 , $46)
Real Client Managed Portfolio

19. Real Client Managed Portfolio
Technical Analysis
Source: Yahoo! Finance
Real Client Managed Portfolio

20. Recommendation Sell 300 Shares Limit $40 Comparable Valuation
Overvalued
Growth possibilities
Macroeconomic uncertainty
Comparable Valuation
$ 45
DCF Valuation
$ 38
Current Price $
Real Client Managed Portfolio