NEW YORK (TheStreet) -- Assessing the value in Steelcase (SCS - Get Report), one of the world's largest manufacturers of office furniture with $3 billion in annual sales, hasn't been easy. While Steelcase's stock price, at near 52-week highs, isn't cheap compared to the broader market, investors appear comfortable with the company's cost-cutting initiatives, which have offset weak sales. The only question is, How long can this strategy pay off?

Steelcase's stock price is gaining more than 1% on Monday, compared to Friday's close, having risen to $20.08 as of 12.05 p.m. The company will report fourth-quarter and full-year earnings results on Tuesday. The stock price increased about 11% so far in 2015 and climbed 35% in the past 12 months, dominating the broader averages in both periods.

For the quarter ended on Feb. 28, analysts polled by Yahoo! expect earnings of 20 cents per share on revenue of $769 million, which would result in an 11% increase and a 1.3% decline, respectively, compared with the period last year. For the full year, earnings are projected to climb 8.5%, while revenue is expected to be $3.08 billion, up 3% from last year.

With full-year earnings projected to climb at almost there times faster than revenue, combined with the cost-cutting measures that Steelcase is making to offset currency impacts, having patience is the best play here for investors. While shares aren't cheap at about 29 times earnings, compared with a P/E of 21 for the S&P 500 (SPX) index, Steelcase deserves the premium price based on the expected profit boost that should result from its cost cuts.

Headquartered in Grand Rapids, Mich., Steelcase has an extensive global scope, operating throughout the Americas, Europe, the Middle East and Africa, among other areas. Steelcase has grown by designing and selling various types of office furniture -- whether they are freestanding pieces or units that rely on panels. And its products include chairs, tables and ergonomic work tools. The company also specializes in ceramic steel surfaces, like office whiteboards and chalkboards for schools.

Whether providing equipment for schools, businesses or government, Steelcase strives to be a one-stop shop for all office and business-related furniture needs. But sales have been hard to come by. In its fiscal third-quarter, the company's revenue of $800 million rose just 2% above the year-ago quarter, missing Yahoo! analysts' estimates by more than $26 million.

Complicating matters, in the Americas (the U.S., Canada and Latin America), organic revenue declined slightly under 1% from last year. Organic revenue is an important metric because it reveals the underlying strength of a business with a focus on sales not aided by mergers and acquisitions. Plus, even within regions like France where sales were strong, the Steelcase has experienced adverse currency impacts due to the strength of the U.S. dollar.

Helping its cause, Steelcase seems to understand the challenges. The company continues to restructure its business to lower costs and expand margins. Steelcase has focused on its European operations by cutting back on its capacity. Essentially, the company has strived to reduce its manufacturing in those regions where margins haven't been that great.

Last quarter, it cost the company more than $37 million to transfer its manufacturing facility in France to a third party. Of that $37 million, Steelcase paid roughly $27 million in restructuring costs, which took a chunk out of its third-quarter profits.

What's more important for investors to focus on now, however, is the value Steelcase can create in the quarters ahead when sales can come from areas where the currency impact won't be as big of an issue. And when those foreign currencies do strengthen, Steelcase may have already made the necessary moves to run its operations at optimal levels with less overhead. And that's what investors are hoping for.


 

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.