Ethan Allen wants customers to think of its upscale home furniture as classic yet trendy, offering top quality at a good price, and being a solid, long-term investment. That's also how many analysts describe the company's stock.

We agree that it's a long-time performer, and think it's a smart time to buy.

More from FSB Help wanted for HR firm A CEO and rodeo queen King of the mountain bike Current Issue

Sure, Ethan Allen's share price has tumbled of late - plummeting from its early May high around $45 into the mid-$30 range today. The slide was precipitated by widespread downgrades in the furniture business at the beginning of June, from analysts who cited slowing home sales and rising interest rates.

But the company itself is doing better than ever. With a redesigned product lineup leading double-digit sales growth in the most recent quarter, as well as improving margins and earnings, Ethan Allen is a low-risk play in a tough industry. It's a good bet to regain the ground it lost.

Ethan Allen is hardly a small-cap secret, or a small player. It has 311 retail outlets worldwide and generated revenues of $949 million in 2005. Yet it has consistently delivered profits and product quality usually associated with boutique brands, not with high-volume peers like La-Z-Boy and Furniture Brands International.

Indeed, for the past few years, the Connecticut-based company - which in addition to sofas, chairs, and beds offers interior design consulting - has been the model company in home furnishings.

While revenues have not grown significantly since 2001, earnings haven't fallen off, averaging 14.8% of revenues in the past five years. That's an unusually high figure for a low-margin business.

"It's the best of breed," says Budd Bugatch, a veteran furniture industry analyst at Raymond James.

Also encouraging is Ethan Allen's rejuvenation of its product lineup. The update has brought several new casual and contemporary styles to the brand, which before the 1990s was limited to classic American colonial. Last year, a new line aimed at the young urban market - called Tango - was launched to much acclaim.

"I would call it a new Ethan Allen in terms of style, fashion, and value," says CEO Farooq Kathwari, who has been at the helm since 1985.

Of course, being best in a troubled industry wouldn't be grounds for a stock recommendation. Many observers worry that home-furnishing sales will be hurt by the bearish housing market, which is partly what prompted the industry's recent stock slide.

But Ethan Allen has moved aggressively to avoid slumping cities and regions. It is relocating 15 stores annually year into more profitable locales, often by buying out retail partners, moving the stores, and converting them into exclusive Ethan Allen outlets. Today, 134 of its 311 outlets are owned and operated by the company. The rest are independent retailers. Ethan Allen-brand stores also offer interior design consulting, a high-margin business.

"We are transitioning Ethan Allen from a furniture business into an interior-design business," says Kathwari. "Service is the new luxury."

Kathwari also made the controversial decision in 2004 to eliminate all sales and promotions. Ethan Allen started offering consistently lower sticker prices - "everyday best pricing," he calls it - rather than start with higher prices and push frequent discounts, a favorite furniture-business gimmick. His hope was to reduce inventory volatility and improve overall customer satisfaction.

"Everybody told me that the American consumer will not buy unless you fool them," he says. "But I wanted us to focus on service."

The strategy is working so far: Margins improved year-over-year in the third quarter, reversing declines in the previous two years, according to Matrix USA Investment Research. This has helped earnings stay constant despite rising costs.

"It continues to deliver the best margins of any residential furniture company," adds analyst Bugatch.

Overall sales improved 15.5% in the third quarter of 2006, led by a new national TV ad campaign and the success of Tango, which has now become Ethan Allen's No. 1 selling line.

"Kathwari has figured out how to make the brand sexy, but also more affordable," says Ray Allegrezza, editor at Furniture Today, an industry magazine. The sales trend is expected to continue through the fourth quarter, which ends later in June. Revenues are projected to break the $1 billion mark for fiscal year 2006.

All in all, Ethan Allen is a bargain, trading at three points below its historic multiple. And with its expanding high-margin interior-design business and new product line, there's momentum that could push the share price past its 52-week high of $45 over the longer term. In any case, it's a comfy place to sit and ride out a stormy market.

Related: Best new home decor from small businesses

La-Z-Boy earnings uncomfortable