Simple Concepts Research Group

How Are Investors Are Assessing Culp (NYSE: CULP) Stock?

by | Nov 26, 2021 | 52 Week Lows, Stock Picks

Culp, Inc. (CULP) Company Overview & Stock Price Forecast

This article provides a brief analysis and stock rating for Culp, Inc. (CULP) including an updated stock price target. Additional data on the company’s earnings yield, price/earnings ratio, return on invested capital and YTD performance are discussed as well.

Culp Fundamentals

CULP Stock Rating

Stock Price Target: $18.27

In the section below, we discuss the earnings yield, P/E, return on invested capital and YTD performance for Culp, Inc. in comparison to the Apparel industry and the S&P 500.

Culp, Inc. is a Small Cap company with a Market Cap of $134.6M.

How are investors using Culp’s earnings yield to assess the company?

Culp, Inc. (CULP)_ Earnings Yield in Comparison to the Apparel Industry, S&P 500 and 10 Year Treasury Rate (1)

The earnings yield is used to show the percentage of a company’s earnings per share. Investors typically use earnings yield to determine which assets are underpriced or overpriced relative to other variables, like sector, industry or bond yields. Simply put, the earnings yield of a company can be used to assess how expensive a company is in relation to the earnings that are generated. When valuing companies, the SIS Research Group does not utilize the inverse P/E ratio to calculate the earnings yield. Instead, we use an adjusted earning yield calculation to capture variation amongst companies (i.e. debt and tax rates).

The current earnings yield for Culp, Inc. is 15.10%%, in comparison to 3.38% for the S&P 500 and 1.54% for the 10-year treasury bond. The median earnings yield for the Apparel industry is 7.07%.

What does Culp Price-to-Earnings Ratio (P/E) tell investors about the company?

Culp, Inc. (CULP stock)_ Price-to-Earnings, Price-to-Sales and Price-to-Book Value in Comparison to the Apparel Industry and the S&P 500

The price-to-earnings ratio (P/E) is a relatively popular metric used by investors and analysts for valuing a company’s stock. The P/E ratio can be used to show how a stock’s valuation compares to other companies and the total market. Investors use the P/E ratio to determine what the market is willing to pay today based on a company’s past or future earnings. A high P/E ratio could mean that a stock’s price is too high relative to earnings, which could be a signal that a stock is currently overvalued. In turn, a low P/E ratio could indicate that a company’s current stock price is low relative to earnings. 

Culp, Inc. is currently trading at a P/E of 15.96. The P/E for the Apparel industry is 29.25 and the P/E for the S&P 500 is 29.59.

What is the current Price-to-Sales Ratio (P/S) for Culp?

The Price-to-Sales Ratio (P/S) looks at a company’s market cap and revenue to determine valuation. The P/S ratio is calculated by taking a company’s market cap and dividing by the total sales or revenue. The P/S ratio gives an idea of how much the market values every dollar of a company’s sales and can be effective in valuing unprofitable growth stocks or companies that are currently undergoing special situations or challenges. A lower the P/S ratio can be an indicator of good value.

Culp, Inc. is currently trading at a P/S of 0.43. The P/S for the Apparel industry is 1.60 and the P/S for the S&P 500 is 3.21.

How does Culp’s Price-to-BookRatio (P/B) compare to the Apparel industry?

Price-to-book value (P/B) is the ratio of the market value of a company’s shares divided by its book value of equity (the value of it’s assets on the books). The book value is the difference between the book value of assets and liabilities. Typically, investors use the P/B ratio to assess if a stock is valued properly (a value of one means that the stock price is trading in line with the book value of the company). A company with a high P/B ratio could mean the stock price is overvalued as well as the converse.

Culp, Inc. P/B ratio is 1.01. The P/B for the Apparel industry is 4.11 and the P/B for the S&P 500 is 4.84.

How attractive is Culp‘s Return on Invested Capital (ROIC) to investors?

Culp, Inc. (CULP)_ Return on Invested Capital in Comparison to the Apparel Industry and the S&P 500

Investors use the return on invested capital (ROIC) to assess how efficient a company is at turning capital into profits. The ROIC is the amount of money a company makes on it’s investments that is above the average cost of debt and equity.

Investors can use the ROIC to provide context for metrics like the (P/E) ratio. For instance, when used in isolation a low P/E ratio could suggest a company is oversold but the decline could be because a company is no longer generating value for shareholders. Conversely, companies that consistently generate high rates of ROIC can plausibly trade at a premium compared to other stocks, even if their P/E ratios are high.

Culp, Inc. ROIC is currently 6.16% in comparison to 21.12% for Apparel industry and 8.60% for the S&P 500.

What is Culp’s YTD Performance in comparison to its industry and the total market?

The year-to-date (YTD) performance is the amount of profit/loss realized by a stock since the first trading day of the current calendar year. 

The YTD performance for Culp is -33.46%. The Apparel industry has a YTD performance of 19.12% in comparison to the YTD S&P 500 performance of 25.22%.

Culp, Inc. (CULP)_ YTD Performance in Comparison to the Apparel Industry and the S&P 500

Recent Financial Results

  • Net sales of $83M, up 28.8 percent over the prior-year period, with mattress fabrics sales up 19.3 percent and upholstery fabrics sales up 41.0
  • Operating income of $3.3M, up 76.2 percent compared to prior year
  • Net income of $2.3M, or $0.18 per diluted share, compared with a net loss of $(2.7M) in the prior year
  • Total cash and investments of $44M, no outstanding borrowings as of August 2021
  • Cash flow from operations and free cash flow of $1.6M and negative $(782,000), respectively
  • Company announced its regular quarterly cash dividend of 11 cents per share, payable in October 2021 (annual indicated dividend of $0.44 per share, with a yield of 3.34%, based upon a closing stock price of $13.17 in August 2021)
  • Culp repurchased 48,686 shares of common stock during Q1 2022. The company has subsequently repurchased an additional 47,767 shares through August 2021, leaving approximately $3.6M available under the company’s recently reinstated share repurchase program.

Stock Price Target: $18.27

Company Overview

CULP Stock Rating

Culp, Inc. manufactures and sells mattress fabrics, sewn covers, and cut and sewn kits for use in mattresses, foundations, and other bedding products in North America and internationally. It operates in two segments: Mattress Fabrics and Upholstery Fabrics.

The Mattress Fabrics segment offers fabrics for use in the production of bedding products, including mattresses, box springs, foundations, and top of bed components. The Upholstery Fabrics segment provides fabrics for use in the production of residential and commercial upholstered furniture, office seating and window treatment products.

Culp, Inc. was founded in 1972 and is headquartered in High Point, North Carolina. The current CEO is Robert Culp IV.

Be sure to add Culp, Inc. (CULP) to your Watch List and if you haven’t done so already, check in on the performance of our Current Portfolio. Keep it simple and always do your due diligence.

This material is provided for informational purposes only and is not financial advice. The information contained herein should not solely be used for the formation of an investment decision, whether you are a long term or short term investor.