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Bassett Furniture (BSET) reported fiscal third quarter earnings last week that appeared to be in-line with market expectations. Revenues rose 8.5 percent, led by same-store sales growth of 9.9 percent, and earnings per share rose to 21 cents per share, from 4 cents per share in the year-prior period.

As I noted after strong Q2 earnings, Bassett has a lot going for it. After selling its stake in the International Home Furnishings Center in 2011, the company has over $5 per share in net cash on its balance sheet, nearly 40% of its market capitalization at Tuesday's close of $12.41. It raised its quarterly dividend to 5 cents earlier this year, providing a 1.6% yield, and has authorized special dividends of 50 cents in January and $1.25 per share payable later this month. The company has also repurchased nearly 200,000 shares -- nearly 2% of shares outstanding -- in the first three quarters of the fiscal year. Tangible book value per share has increased steadily, finishing the third quarter at $14.28 per share, meaning the stock is still trading at a 13% discount to the net value of its assets.

And while net top-line growth has been modest through the first nine months, comps have been excellent, and continue to improve. Same-store sales improved 6.5%, 7.9% and 9.9%, respectively, in the first three quarters, with written sales -- sales ordered but not yet delivered -- up 13% in the third quarter, boding well for further comp improvement in Q4. Going forward, the company hopes a new partnership with HGTV -- which has resulted in increased marketing spend and a re-design of company-owned stores -- will continue to boost sales going forward.

Bassett stock has responded, gaining some 68% year-to-date. The question now for investors is whether the new, higher valuation is still justified by the company's admittedly strong sales growth. Bassett does have trailing earnings of 94 cents per share, or about $10 million in net income; but excluding a $9 million payment received under an anti-dumping act, and a $1.9 million tax benefit in Q3, the company will likely post a net loss in fiscal 2013.

Of course, that will change -- quickly -- if same-store sales growth continues. As the housing market slowly recovers, Bassett should benefit; if the HGTV partnership is a success, the company should be able to continue its strong comp growth. If it does, earnings will return in force, and the stock price should continue to rise.

With the stock still trading below tangible book value, and the company's clear intent to purse shareholder-friendly policies, Bassett looks like it's worth the gamble. Revenue is growing; cost of sales has decreased over the first nine months, and the company has a clear path to continue its recent success. There are definite near-term risks in the still-fragile housing recovery and the overall economy; but Bassett has been executing well for nearly a year and a half now. With the HGTV partnership and Q4 growth ahead, it seems likely that trend will continue.

Source: Bassett Furniture Continues To Impress