One difference the pandemic has made to our lives is that everyone realizes how much can be achieved even when you aren’t taking long drives to the office. Over the last couple of years, this has been driving people to buy or rent larger accommodations.

And it isn’t just the family that’s driving this demand either. Many younger people who had been sharing accommodation, no longer found it as convenient when they were spending so much time at home. When new for-sale homes proved too expensive, they started looking further away, especially since distance from the office didn’t matter.

But suburban prices weren’t much better. So many looked for rental accommodation instead. And the sudden surge in demand meant a lack of availability followed by higher rates on rental properties as well.

So while some people found what they were looking for, a large number had to settle for redoing what they already had. And this phenomenon is continuing this year as well. Even if over the next few months, more properties become available, we have to come to terms with the fact that demand is so much higher that we have people choosing mobile homes and alternative accommodation until things normalize.

And this is very good news for companies offering home improvement products, as we can see in the selection below-

Ethan Allen Interiors Inc. (ETD Quick QuoteETD - Free Report)

Ethan Allen, which is an interior design company that manufactures and sells home furnishings in the U.S., Mexico, Honduras and Canada reported strong earnings results last Friday.

Farooq Kathwari, Ethan Allen’s chairman, president and CEO said, “Our differentiation of relevant offerings, strong and talented associates, and control over our manufacturing and logistics, provided us an opportunity to show strong growth despite many continuing challenges, including supply chain issues and inflation.”

And so, despite these challenges, Ethen Allen was able to grow its revenue and earnings by a respective 16% and 38%. What’s more, these results blew past the Zacks Consensus Estimates (earnings beat by 25% on revenue that beat by 11%). Analysts too have raised their estimates (by 18 cents or 6% for the year ending in Jun 2022 and by 4% for the following year).

Ethan Allen shares are, however, rather undervalued. The P/E based on forward 12 months earnings is just 7.91X, well below the median level of 9.64X over the past year, as well as the S&P 500’s 20.03X. They’re also undervalued on a P/S basis.

The Zacks Rank #1 (Strong Buy) stock has a Value Score of A. So investors looking to keep their risk low may want to park their money here.

Tempur Sealy International (TPX Quick QuoteTPX - Free Report)

Tempur Sealy focuses on bedding products that are sold in the U.S. and Canada, as well as other markets.

Tempur Sealy will report later this month. In the last-reported quarter, it grew revenue by 20% and earnings by 19%, excluding a slight negative impact from currency. On that occasion, its chairman and CEO Scott Thompson attributed the strong sales to “growth across all brands, products, channels and segments.” This was despite the fact that there were difficult comps and supply chain constraints that didn’t allow it to service all demand.

The company remains focused on long-term growth by expansion of the total global addressable market, international expansion, industry-leading innovation capabilities and balanced capital allocation. Most encouragingly, he assured that “In 2022 and beyond, we expect to leverage these complementary building blocks to deliver double-digit sales and EPS growth."

There haven’t been any estimate revisions of late, which means that the Zacks earnings expected surprise prediction (ESP) is 0%. That still translates to a fair chance of an earnings beat since the shares carry a Zacks Rank #2 (Buy). Both value and growth scores are A, indicating that this is a way to buy growth at relatively low prices.

Which brings us to the question of valuation. Tempur Sealy shares trade at 10.30X P/E, which is below their median value of 13.06X over the past year and of course the S&P 500. On a P/S basis, the shares are trading at 1.36X, which is not cheap in absolute terms (P/S should ideally be less than 1 to indicate undervaluation). But a comparison with what they have been over the past year and also the S&P 500 is encouraging.

Beacon Roofing Supply (BECN Quick QuoteBECN - Free Report)

Beacon Roofing Supply is a distributor of residential and non-residential roofing materials, as well as a whole range of other building products to contractors, home builders, building owners, lumberyards and retailers.

Beacon Roofing is expected to report this week. In its last-reported quarter, the company grew its revenue by 7% and earnings by 47%. While all segments of the business grew, building products other than roofing was the strongest, followed by non-residential roofing and then residential roofing. For the fiscal year ending September however, residential roofing was almost as strong as other building materials, with non-residential roofing growth being slower.

Julian Francis, Beacon Roofing’s president and CEO attributed the results to “focused market and price execution” and the success of its “high-value solutions” which together allowed it to grow despite a “supply-challenged environment.”

In the last 30 days, analysts have taken their 2022 estimates up an average 23 cents (around 5%). 2023 estimates also edged higher. The company’s Zacks Rank #2 and ESP of 0.94% indicates a good chance of its beating estimates this quarter.

Beacon Roofing shares have an A for value and B for growth, meaning that this is also a way to buy growth at reasonable prices. On a P/S basis, the shares trade at 0.55X, which is cheap both in absolute terms and with respect to the S&P 500, and are at its median value over the past year. On a P/E basis, the shares trade at 10.69X, well below their median value of 12.90X and the S&P 500.

One-Month Price Performance

Image Source: Zacks Investment Research