The home improvement industry’s prospects appear stable, thanks to rising urbanization and strong consumer spending. Therefore, it could be wise to own fundamentally strong home improvement stocks Alarm.com Holdings, Inc. (ALRM), Hamilton Beach Brands Holding Company (HBB), MillerKnoll, Inc. (MLKN), Steelcase Inc. (SCS) and Lifetime Brands, Inc. (LCUT).These stocks are A (Strong Buy) rated in our POWR Ratings system.
Before delving deeper into their fundamentals, let’s discuss what’s happening in the home improvement industry.
The home improvement market is expanding due to increased demand for remodeling, which is driven by homeowners seeking increased property value and better living spaces. Moreover, technological advancements such as visualization apps and 3D software are helping to improve the home remodeling process.
The global home improvement market is expected to reach $490.13 billion by 2030, growing at a CAGR of 4.7%.
According to the most recent smart home survey, as many as 69.91 million households in the US are actively using smart home devices in 2024. This is a 10.2% increase over the 63.43 million recorded in 2023. Also, according to smart house data, the US smart home market is expected to grow even further. From 2025 to 2028, annual growth rates are expected to be 10.2%.
Considering these conducive trends, let’s take a look at the fundamentals of the five best Home Improvement & Goods stocks, starting with the fifth choice.
Stock #5: Alarm.com Holdings, Inc. (ALRM)
ALRM offers various technology solutions for residential, multi-family, small business, and enterprise commercial markets internationally. It operates in segments: Alarm.com and Other. The company provides solutions to control and monitor security systems and IoT devices, including door locks, garage doors, thermostats, and video cameras.
ALRM’s trailing-12-month ROTA of 4.81% is 437.9% higher than the industry average of 0.89%. Its trailing-12-month ROCE of 10.75% is 388.9% higher than the industry average of 2.20%.
In the third quarter ended on September 30, 2023, ALRM’s net revenue grew 2.6% year-over-year to $221.85 million. The company’s net income came in at $19.35 million or $0.37 per share, up 6.8% and 5.7% from the prior year’s quarter, respectively. Also, the company’s adjusted EBITDA increased 1.5% from the year-ago value to $41.43 million.
Analysts expect ALRM’s revenue to come in at $922.18 million for the year ending December 2024, up 4.8% year-over-year. Its EPS is expected to grow 8.8% year-over-year to $2.09 for the same period. It is expected to surpass EPS in all four trailing quarters. The stock has gained 44% over the past nine months to close the last trading session at $69.76.
ALRM’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
ALRM has a B grade for Stability, Sentiment and Quality. Within the B-rated Home Improvement & Goods industry, it is ranked #5 out of 56 stocks. To see additional POWR Ratings for Growth, Value and Momentum for ALRM, click here.
Stock #4: Hamilton Beach Brands Holding Company (HBB)
HBB designs, markets, and distributes small electric household and specialty housewares appliances globally. It offers air fryers, blenders, coffee makers, irons, juicers, mixers, etc. It provides air purifiers under the Clorox and TrueAir brands, consumer products under the Hamilton Beach and Proctor Silex brands, and commercial products for restaurants, bars, etc.
On February 5, 2024, HBB reported that its Hamilton Beach Health subsidiary had acquired HealthBeacon PLC, a medical technology firm and key partner of the company. HealthBeacon creates linked devices that allow people with chronic diseases to manage their injectable medication regimes at home and offers other health services.
HBB's acquisition of HealthBeacon will strengthen its position in healthcare technology, provide novel solutions for chronic conditions, and improve patient outcomes through personalized care.
HBB’s trailing-12-month asset turnover ratio of 1.55x is 56.7% higher than the 0.99x industry average. Its trailing-12-month levered FCF margin of 16.43% is 192.4% higher than the 5.62% industry average.
HBB’s revenue for the fiscal third quarter ended September 30, 2023, increased 1.9% year-over-year to $153.61 million. Its gross profit increased 15% over the prior year quarter to $40.07 million. The company’s net income increased 75% year-over-year to $10.34 million. Also, its EPS came in at $0.74, representing an increase of 72.1% year-over-year.
HBB’s shares have gained 96.1% past nine months to close the last trading session at $19.63.
It’s no surprise that HBB has an overall A rating, equating to a Strong Buy in our POWR Ratings system. It has an A grade for Value and a B grade for Growth and Sentiment. It is ranked #4 in the same industry.
Beyond what is stated above, we’ve also rated HBB for Stability, Momentum and Quality. Get all HBB ratings here.
Stock #3: MillerKnoll, Inc. (MLKN)
MLKN researches, designs, manufactures, and distributes interior furnishings worldwide. It operates through three segments: Americas Contract; International Contract & Specialty; and Global Retail.
MLKN’s trailing-12-month gross profit margin of 37.70% is 24.4% higher than the industry average of 30.31%. Its trailing-12-month levered FCF margin of 9.02% is 38.6% higher than the industry average of 6.51%.
For the second quarter that ended December 2, 2023, MLKN reported net sales of $949.50 million. The company’s operating earnings increased 56.1% year-over-year to $60.40 million. Its net earnings came in at $34.40 million, up 96.6% from the prior year’s quarter. Also, its adjusted EPS rose 28.3% from the year-ago value to $0.59.
Street expects MLKN’s revenue to come in at $3.74 billion for the year ending May 2024. Its EPS is expected to grow 11.9% year-over-year to $2.07 for the same period. It is expected to surpass EPS in all four trailing quarters. Shares of MLKN have gained 94.5% over the past nine months to close the last trading session at $30.05.
MLKN has an overall A rating, equating to a Strong Buy in our POWR Ratings system.
MLKN’s is ranked #3 in the same industry. It has a B grade for Growth, Value, Momentum and Quality. To see additional MLKN’s ratings for Stability and Sentiment, click here.
Stock #2: Steelcase Inc. (SCS)
SCS offers a portfolio of furniture and architectural products internationally. The company operates through Americas; EMEA; and other segments. Its portfolio comprises furniture systems, seating, storage, fixed and height-adjustable desks, lighting, task chairs, and textiles. It serves corporate, government, healthcare, education, and retail customers.
SCS’s trailing-12-month gross profit margin of 31.78% is 4.4% higher than the 30.43% industry average. Its trailing-12-month levered FCF margin of 9.59% is 47.5% higher than the 6.50% industry average.
During the third quarter that ended November 24, 2023, SCS reported revenue of $777.90 million. Its gross profit rose 6.1% from the year-ago value to $252.30 million. Also, the company’s net income and earnings per share came in at $30.8 million and $0.26, increases of 170.1% and 160% year-over-year, respectively.
SCS’s revenue is expected to increase 2.9% year-over-year to $3.26 billion for the year ending February 2025. Its EPS is expected to grow 12.5% year-over-year to $0.99 for the same period. It surpassed EPS estimates in all four trailing quarters. Over the past nine months, the stock has gained 96.9% to close the last trading session at $13.35.
SCS’s overall A rating equates to a Strong Buy in our POWR Ratings system. It has an A grade for Value and a B for Growth, Momentum and Quality. The stock is ranked #2 in the same industry. We’ve also rated SCS for Stability and Sentiment. Get all SCS ratings here.
Stock #1: Lifetime Brands, Inc. (LCUT)
LCUT designs, sources, and sells branded kitchenware, tableware, and other products for use in the home in the United States and internationally. The company provides kitchenware products, including kitchen tools and gadgets, cutlery, kitchen scales, thermometers, cutting boards, shears, cookware, pantryware, spice racks, and bakeware; and tableware products comprising dinnerware, stemware, flatware, and giftware.
LCUT’s trailing-12-month gross profit margin of 36.93% is 3% higher than the 35.86% industry average. Its trailing-12-month levered FCF margin of 9.74% is 69.8% higher than the 5.74% industry average.
LCUT’s net sales increased 2.7% year-over-year to $191.67 million in the fiscal third quarter ended September 30, 2023. Also, its adjusted EBITDA increased 259.2% year-over-year to $19.65 million. Its net income came in at $4.21 million, compared to a loss of $6.36 million in the previous-year quarter. Also, its net income per common share came in at $0.20, compared to negative $0.30 in the previous-year quarter.
LUCT’s revenue is expected to increase by marginally year-over-year to $685.21 million for the year ending December 2024. Its EPS is expected to grow 26.5% year-over-year to $0.70 for the same period. It surpassed EPS estimates in all four trailing quarters. Over the past nine months, the stock has gained 102.6% to close the last trading session at $10.15.
LCUT’s overall A rating equates to a Strong Buy in our POWR Ratings system. It has an A grade for Growth and Sentiment and a B for Value, Momentum and Quality. It is ranked first in the same industry. Click here to see the additional POWR Ratings for Stability for LCUT.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
ALRM shares were trading at $69.76 per share on Monday morning, down $1.24 (-1.75%). Year-to-date, ALRM has gained 7.95%, versus a 5.09% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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