SCS - Steelcase: A Challenging Turnaround Case

2024-03-08 11:57:32 ET

Summary

• Steelcase is undergoing a turnaround, with minimal revenue growth and declining returns over the past 11 years.
• The office furniture sector is not a high-growth industry, but Steelcase has managed to control its SGA margins and shows signs of improving its contribution margin.
• Apart from being financially sound, the company has a 30% margin of safety based on its EPV, making it a worthwhile investment opportunity.

Investment Thesis

Steelcase Inc ( SCS ) is not a growth company. Over the past 11 years, revenue only grew at 0.6% CAGR. Its returns have also declined. I would consider Steelcase as a company undergoing a turnaround.

But there are a few positive things in its favor. While the office furniture sector is not a high-growth one, it is not a sunset sector. The company has managed to control its SGA margins and there are signs of improving contribution margin. There is also more than a 30% margin of safety based on its EPV. It is a turnaround worth a bet.

Background

Founded in 1912, Steelcase went public in 1998. Steelcase is a global enterprise committed to enhancing people's work experiences by designing and providing innovative furniture and architectural solutions....

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