Stifel Initiates Coverage On Culp, Notes Improving Business Model

Stifel initiated coverage Culp (NYSE: CFI) with Buy rating and $21 price target.

“We are attracted by a management team that has run the business with a very efficient use of capital over the past several years,” said John Baugh. “We point out that returns on capital have been better than 20% for the past five years and capital employed has been reduced nicely over the past ten years.”

According to Stifel, Culp will produce six percent free cash flow yield that may be returned to shareholders in a special dividend, in addition to the $0.05 quarterly dividend.

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The research report also stated the company has done well making changes to the business structure, improving business fundamentals with good growth coming from end-market demand as well as some share gains. The most notable changes came from its upholstery business, where capital has reduced substantially and operations shifted to China.

Culp traded recently at $18.16, up 1.4 percent.