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Restoration Hardware Stock is More Than a Stock Split Play

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The question for investors is what to make of Restoration Hardware (NYSE:RH) stock. The company sells high-end furniture, lighting and other home furnishings. The company witnessed a boom in its stock price as sales moved higher during the pandemic. Although shares traded below $200 prior to the pandemic, they swelled above $700 in 2021. The shares have since fallen between $300 to $350. So, investors want to know if the good times are over or if RH stock can move higher again.

One reason to believe that Restoration Hardware will move higher is the company’s planned 3-for-1 stock split. The company announced the stock split back in March, but no definitive date for it has been announced yet. Stock splits have become increasingly popular with large tech firms utilizing them in an effort to bring share prices higher. By and large, it has worked. And that has left many wondering whether it makes sense to invest in Restoration Hardware in the hopes that its stock will perform similarly after the split.

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On the one hand, many pundits have noted that a stock split doesn’t actually change the inherent value of the company. While that may be true, perception is equally important. Investors don’t want to pay large sums of money for a single share of stock. So, when Restoration Hardware enacts its 3-for-1 stock split, investors will have shares that will probably be worth somewhere in the range of $100 to $150 each. Those shares will suddenly be more attainable. But that in and of itself doesn’t make them worth purchasing. 

Fundamental performance does. And that is why I think it makes sense to look at RH stock. According to the 17 analysts who cover it, the company should record around $924 million in revenue in the first quarter. The company recorded nearly $861 million in revenues in the first quarter of 2021. That means it is still growing. investors shouldn’t discount that growth. The company isn’t likely to boom as it did during the pandemic, but that doesn’t matter. It has shown consistent growth. Its high-end products have a strong market and that is why investors should consider Restoration Hardware prior to its 3-for-1 stock split. 

On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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