Craftmade International: Undervalued?

| About: Craftmade International (CRFT)

Craftmade International Inc.(Nasdaq: CRFT) manufactures and sells various home furnishings products, both indoor and outdoor. Some of the types of products they produce for inside homes include ceiling fans, door chimes, lighting kits, clocks and weather gauges. They sell product through major retailer chains and wholesalers.

CRFT is a small cap stock with a market cap of $28.2 million. As explained here, small cap companies have more chance of the stock price being inefficient compared to prices of large cap companies. The stock is trading with a P/E of 7.4 and a P/B of 0.77. The stock has a 52 week high price of $17.11 and a current stock price of $4.95. That's a 71% price drop from its 52 week high! The company raised its dividend payout to 12 cents/quarter on Sep 2005, which based on the current stock price, yields 9.7%.

The company is cash flow positive and has been had positive net earnings in each of the past 10 years. In addition, the return on equity average for the past 10 years is 26.7% (positive in each year) and the average return on assets is 11.5% over the same period.

From a liquidity perspective, the company has a current ratio of just over 4 which seems ample for their business. When you include the impact of operating leases to their long term debt levels, the total debt to capitalization level is around 54%. This is not massively high, but it does need to be monitored. As of the last quarterly report (Mar 31, 2008), the interest coverage ratio is around 3 times, which is fine.

This stock looks potentially undervalued but a lot more analysis is required. Stay tuned.