Up 2000 Percent From 2009 Lows, When Will This Small Cap Stock Stop (BSET)

Bassett BSET is a vertically integrated home furnishing manufacturer that sells its products and imported products in their own stores and other retailers throughout the United States.

Industry and Competition

According to the US Census Bureau, durable good purchases have been soaring this year. Compared to June 2012, durable good orders for the month rose 4.2 percent to $244.5 billion. Part of this was for increased inventories which rose 0.2 percent.

Because Bassett operates in both the manufacturing and retail selling of its products, it faces an especially high amount of competition from regional, national, and international producers and retailers.

The bullish case for these different segments of operation is that increased competition in one aspect of the business will be less dangerous for the well being of the company.

Related: La-Z-Boy Rises After Q4 Earnings; Stock Trading At New 52 Week High

Risk Factors

Furniture can be described as discretionary purchasing, especially because Bassett doesn’t produce low end furniture. A downturn in the economy could be very dangerous, as was seen when the share price fell more than 90 percent in the most recent recession.

A lot of the company’s revenue comes from partner retailers selling their products. If competitors offer more attractive revenue sharing or wholesale programs, Bassett’s sales could be damaged.

Financials

After a pullback in 2008, revenue has been steadily climbing, up 25 percent since 2009. Disregarding one time income streams, profit has been following a similar pattern, reaching profitability in 2012.

Over the past year, Bassett has been able to boost gross profit by shrinking the cost of goods sold as a percentage of sales. The company has also been able to maintain selling, general, and administrative expenses despite rising sales.

Shares have risen more than 31 percent this year on strong earnings.

Insiders and Institutions

Insiders have been active this year, with purchases and sales roughly equalling each other. Purchases include the CEO, Robert Spilman.
Institutions and mutual funds own about two thirds of this stock and have increased their stake this quarter. Institutions added 2.25 percent with mutual funds adding 4.35 percent.

Up almost 30 percent this year, shares of Bassett closed at $16.19 Monday.