Steelcase Poised to Extend Earnings Winning Streak but Stock Looks Undervalued

NEW YORK (TheStreet) -- Steelcase (SCS), one of the world's largest manufacturers of office furniture will report first-quarter fiscal 2016 earnings results Wednesday after the closing bell. 

Combined with its diligent cost controls and margins expansion, there may not be a better time to buy shares of an undervalued company with strong growth potential.

The Grand Rapids, Mich.-based company's stock offers a compelling entry point at current levels, especially since shares are down 6% since March. With full-year earnings projected to climb 17%, which is 10 percentage points slower than its five-year annual growth rate of 27%, this suggests meaningful earnings growth acceleration in the years ahead. Based on fiscal 2017 consensus earnings estimate of $1.35 a share, Steelcase is projected to grow next year's earnings at a rate of 30%.

There aren't many S&P 500 companies that are growing earnings at a rate of 30%.

Combined with its 11-cent a share quarterly dividend, yielding 2.4% annually, Steelcase stock, which has a consensus buy rating, offers excellent value. The company generated $3 billion in sales in 2014.

The stock has already foreshadowed some of its potential strength. Steelcase stock is up 6% so far in 2015 and has gained 9% just in the past 30 days.

Steelcase has grown internationally by designing and selling various types of office furniture such as chairs, tables and ergonomic work tools. The company also manufactures ceramic steel surfaces like office whiteboards and chalkboards, selling to schools, businesses and government agencies.

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