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Bull Of The Day: Steelcase (SCS)

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Steelcase (SCS - Free Report) is a Zacks Rank #1 (Strong Buy) and it is the Bull of the Day.  Let's take a look at how this stock became a Zacks Rank #1 (Strong Buy) and why I think this play belongs in your portfolio.

Description

Steelcase Inc. is a designer and manufacturer of products used to create high-performance work environments. Its product portfolio includes furniture systems, seating, storage, desks, casegoods, interior architectural products, technology products and related products and services. The company reports two geographic furniture segments: North America and International.

Recent Earnings

On December 18, the company reported earnings that beat estimates.  I see EPS of $0.36 coming in $0.06 ahead of the Zacks Consensus Estimate for a 20% positive earnings surprise.

Importantly, the company will not report again until March, thus removing the chance of an earnings blow up in the coming weeks as earnings season gets started again.

This was the second straight beat of the Zacks Consensus Estimate, as the company reported a solid 24% positive earnings surprise in the previous quarter.

Estimates

Following the recent beat, I see the Zacks Consensus Estimate for fiscal 2019 moving from $1.13 to $1.17.  That upward movement is what the Zacks Rank is looking for.

The 2020 Zacks Consensus Estimate moved from $1.31 to $1.34.  Again, just what the rank likes to see.

I also wanted to point out that there is some solid implied earnings growth.  Add to that a good history of beating the number and higher estimates and you can see how this stock became a Zacks Rank #1 (Strong Buy).

Valuation

I see a 13x forward PE and that is really good considering there is nearly 17% topline annual growth. That means we are getting a good price here. I see a 2x price to book, so the value players love that too.

A 0.5x price to sales is the only thing that I don’t like here as I like that number to be closer to 1x. I see margins as being rather thin, 3.5% 6 months ago and inching higher to 3.6% and 3.99% over the next two reports.

End of the day, this is a conservative play with good value and an improving financial picture.

Chart

Steelcase Inc. Price and Consensus

Steelcase Inc. Price and Consensus | Steelcase Inc. Quote

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