Stock (Symbol) |
RH (RH) |
Stock Price |
$544 |
Sector |
Retail and Travel |
Data is as of |
December 22, 2021 |
Expected to Report |
March 22 |
Company Description |
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Sharek’s Take |
![]() RH, formerly known as Restoration Hardware, is a luxury furniture store with bathtubs, vanities, bed linens, rugs, wall decor, and even cabinet hardware. The company has evolved from a shopping center furniture retailer into a high-end brand with big lavish mansions that draw buyers in with restaurants and rooftop cafes, which is called the RH Hospitality experience. RH has what it believes is the most comprehensive and compelling collection of luxury home furnishings in the world. The company debuted this new concept in 2015 in Houston. In 2016, management shifted from a promotional to a membership model, which simplified and streamlined its business, and enabled the company to move up from selling products to selling spaces. RH Members Program provides a set discount every day across all RH brands, for an annual fee. In Fiscal Year ending January 31, 2021 79% of sales in the core RH business was from the program’s 434,000 members. The company also produces catalogs (Source Books) and websites which act as virtual extensions of the stores. Here’s a rundown of what’s in store for 2022, the Year of the New:
RH wants to be considered a premier luxury brand, alongside names like Louis Vuitton, Gucci, Cartier, Chanel and Hermes. And truth be told, company has executed its plan to become the premiere luxury furniture brand, while RH stock has been a premium investment. From the IPO on November 2, 2012 to January 1, 2021, RH stock did better than Amazon, Google, Facebook, LVMH and Hermes — but not Tesla. This company is making big profits, has a healthy Estimated Long-Term Growth Rate of 24%, and the stock has a reasonable P/E of 21. With this pipeline of potential catalysts set to launch in 2022, I think the P/E should be 30, and that equates to a hypothetical gain of 69% in 2022. Adjusted Operating Margin was 21.8% last year — that’s better than LVMH — and management sees 25%-plus during the next several years (it was 27.7% last qtr). Last qtr, the company had $145 million in free cash flow and total debt of $178 million. Management had plans to be debt free by the end of this fiscal year. RH is part of the Growth Portfolio. This stock has what it takes to be a true market leader in 2022. |
One Year Chart |
![]() The Est. LTG of 24% seems low to me, as I think this stock should bee a 30% profit-grower the next 3-5 years. Qtrly profit growth just slowed, which is probably another reason for the stock’s decline. RH is dealing with port delays. |
Earnings Table |
![]() Sales performance was driven by strong customer demand in furniture and furnishing products as the company’s supply chain is starting to catch up with the increased demand, growth in RH hospitality business due to easing of COVID-19 restrictions, new restaurant openings, and continued demand in residential constructions and investments by wealthy homeowners, last qtr. Annual Profit Estimates have been increasing for the past year. RH is expected to do $3.8 billion in revenue this year, while management envisions $20 to $25 billion worldwide someday. In addition to sales growth, this company is a beast when it comes to profit margins. Since 2016, Gross Profit Margin has increased from 32% to 34%, 29%, 41%, and 47% each year. While Operating Income as a percent of sales has jumped from 2% to 3%, 9%, 13% and 16% during that span. If RH hits profit estimates this qtr, it will have grown profits (EPS) 37%, 53% and 46% the past 3 years. Qtrly Profit Estimates are for 10%, 2%, -17%, and 8% growth the next 4 qtrs. I’m ok with these poor estimates as the company will be spending on multiple launches. |
Fair Value |
![]() My Fair Value of $919 is 69% above this qtr’s stock price of $544. RH has great upside as we look into 2022. |
Bottom Line |
![]() 2022 will be the Year of the New for RH, and this may usher the company into a new world in terms of luxury brands. What’s so amazing about all this is investors can pick up the stock with a ridiculously low 21 P/E. It’s like a sample sale for the stock. RH moves up from 16th to 4th in the Growth Portfolio Power Rankings. I’ll add to my position tomorrow. |
Power Rankings |
Growth Stock Portfolio
4 of 33Aggressive Growth Portfolio N/AConservative Stock Portfolio N/A |