Culp, Inc.

Company Description

Culp makes fabrics for bedding and upholstery for residential and commercial furniture.

Sales Up 20%

On June 16 Culp reported fourth-quarter results that included over $57 million in sales, a 20% increase since the same period last year. Full-year sales were up just 1.2%, showing the trend continued to improve throughout the year.

Net income came in at $5.0 million, more than doubling the final period of fiscal 2009. Earnings per broke down to 38 cents per shear, beating the Zacks Consensus Estimate by a nickel. This was the seventh consecutive earnings surprise for Culp.

Estimates Rising

The analyst covering Culp raised their estimates heading into the number and then added to those projections after the results exceeded expectations.

The full-year estimate for fiscal 2011 jumped 12 cents a few weeks ago and another penny after the report, to $1.11. This forecast represents a growth rate of 13%.

Next year's estimate is now $1.21, up 3 cents since the number and up 6 cents prior to the news. If Culp hits that mark, it would be a 9% growth rate.

Good Value

Culp is trading at just 11 times forward earnings and with a PEG ratio of roughly 0.5. The price-to-book ratio of 2.7 is higher than its peers, who average 1.4 times, but Culp is showing more profitability.

The company is generating a net margin of 6.4%, while the industry averages -0.7%. Culp's ROE of 23% easily trumps its peers, which come in at 10%.

The Chart

After earnings projections fell of at the height of the financial crisis, they have made a steady rebound. Right now the company is expected to earn more than it has in at least the past 5 years.

Bill Wilton is the Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Growth Trader service