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RH (NYSE:RH): Immense Growth Potential?

Simply Wall St

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Looking at RH's (NYSE:RH) earnings update on 04 May 2019, analysts seem cautiously optimistic, with earnings expected to grow by 32% in the upcoming year compared with the past 5-year average growth rate of 7.2%. Presently, with latest-twelve-month earnings at US$151m, we should see this growing to US$199m by 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.

View our latest analysis for RH

Can we expect RH to keep growing?

The longer term expectations from the 19 analysts of RH is tilted towards the positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To reduce the year-on-year volatility of analyst earnings forecast, I've inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.

NYSE:RH Past and Future Earnings, June 16th 2019

This results in an annual growth rate of 12% based on the most recent earnings level of US$151m to the final forecast of US$258m by 2022. EPS reaches $10.6 in the final year of forecast compared to the current $6.97 EPS today. With a current profit margin of 6.0%, this movement will result in a margin of 8.7% by 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For RH, I've put together three essential factors you should further examine:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is RH worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether RH is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of RH? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.