Legendary guru Chuck Royce (Trades, Portfolio)Â added 501,912 shares of Flexsteel Industries Inc. (FLXS, Financial) to his portfolio on Jan. 31.
Flexsteel Industries was incorporated in 1929 in Minnesota. The company is a manufacturer and importer of residential and commercial upholstered and wooden furniture products. Flexsteel Industries offers products for the living area including sofas and sleepers, sectionals, reclining furniture, lift reclining furniture, chairs and sofas, bookcases and shelving as well as media consoles. The company also provides furniture for the bedroom and dining area as well as the home office.
Flexsteel Industries has a market cap of $333.64 million, a P/E ratio of 14.30, an enterprise value of $339.25 million and a P/B ratio of 1.68.
Flexsteel Industries has two medium warning signs, according to GuruFocus. The company’s trailing annual dividend yield is close to a five-year low at 1.66% annually. During the past 13 years, the highest trailing annual dividend yield of Flexsteel Industries was 8.61%. The lowest was 1.23%, and the median was 2.44%.
Flexsteel Industries' price Friday was close to a 10-year high at $43.96, which is not a great sign for stockholders because the company is trading slightly above its intrinsic value. That leaves investors with little margin of safety, which goes against the investment philosophy of the "Father of Value Investing," Benjamin Graham, that companies must be undervalued before purchasing a security to provide adequate margin of safety.
Royce is a Brown University graduate with a bachelor’s degree and a master of business administration from Columbia University. Royce is known as one of the fathers of small-cap investing. After graduation, Royce landed a job and began his investment career as the director of research at Scheinman, Hochstin, Trotta, then he worked as a security analyst at Blair & Co.
In 1972, Royce founded the Royce Funds where he still remains as the company’s CEO. Royce Funds likes to focus on micro cap, small cap and small/mid-cap securities that have value within their industries and also have strong balance sheets. Royce has 54 years of experience in the investment industry and 44 years of experience managing his own firm.
Below is a Peter Lynch Chart for Flexsteel Industries.
Royce likes to invest in small market cap companies that have strong balance sheets. Flexsteel Industries has a 9/10 Financial Strength rating, according to GuruFocus, with an interest coverage of 241.05, ranking it above 81% of the 615 companies in the Global Home Furnishings & Fixtures industry. Flexsteel Industries is one of the oldest and largest manufacturers, importers and marketers of residential and commercial upholstered and wood furniture products in the U.S. It is possible that the company’s decades of experience had an impact on Royce's decision to boost his stake.
Cheers to your investment success.
Disclosure: Author does not own any shares of this holding.
