What's Driving RH's Surprising 56% Stock Rally?
Over the past three months, RH (NYSE:RH) has seen a significant surge in its stock price, with a gain of 55.76%. The stock's price has risen from $381.05 to a market cap of $7.01 billion. This impressive performance is reflected in the company's GF Value, which stands at $405.83, indicating that the stock is currently fairly valued. This is a notable improvement from three months ago when the stock was significantly undervalued with a GF Value of $407. The stock's price change over the past week has also been positive, with a gain of 12.49%.
Company Overview
RH, a luxury retailer, operates in the $143 billion domestic furniture and home furnishing industry. The company offers a wide range of products across various categories, including furniture, lighting, textiles, bath, decor, and children's items. In addition, RH is expanding its hospitality business, which currently includes 15 restaurant locations. The company is fully integrated across store, web, and catalog channels and is positioned to broaden its total addressable market over the next decade with its World of RH digital platform. This platform highlights offerings outside of home furnishings, along with future offerings in color, antique, bespoke furniture, and more.
Profitability Analysis
RH's profitability is impressive, with a Profitability Rank of 8/10, indicating that the company is more profitable than 80% of other companies in the industry. The company's Operating Margin stands at 18.27%, better than 92.22% of 1093 companies. The ROE is 33.74%, better than 91.83% of 1065 companies, while the ROA is 6.55%, better than 74.41% of 1102 companies. The ROIC is 14.33%, better than 83.29% of 1101 companies. Over the past 10 years, RH has been profitable for 9 years, which is better than 71.1% of 1045 companies.
Growth Prospects
RH's growth prospects are also promising, with a Growth Rank of 8/10. The company's 3-Year Revenue Growth Rate per Share is 7.50%, better than 62.9% of 1043 companies, while the 5-Year Revenue Growth Rate per Share is 8.10%, better than 70.34% of 917 companies. However, the company's future total revenue growth rate is estimated to be -1.60%, which is better than 10.83% of 240 companies. The 3-Year EPS without NRI Growth Rate is 29.90%, better than 72.82% of 824 companies, while the EPS Growth Rate(Future 3Y To 5Y Est) is 8.47%, better than 29.51% of 61 companies.
Top Holders
The top three holders of RH's stock are Steve Mandel (Trades, Portfolio), who holds 1,773,069 shares (9.64%), Steven Cohen (Trades, Portfolio), who holds 255,449 shares (1.39%), and Ron Baron (Trades, Portfolio), who holds 66,720 shares (0.36%).
Competitors
RH faces competition from several companies in the same industry. The top three competitors are Murphy USA Inc(NYSE:MUSA) with a market cap of $6.83 billion, MINISO Group Holding Ltd(NYSE:MNSO) with a market cap of $8.24 billion, and GameStop Corp(NYSE:GME) with a market cap of $5.61 billion.
Conclusion
In conclusion, RH's impressive stock performance, strong profitability, and promising growth prospects make it a compelling investment. The company's robust operating margin, ROE, ROA, and ROIC, coupled with its high profitability and growth ranks, underscore its strong financial health. However, investors should also consider the company's future total revenue growth rate and the competitive landscape in which it operates. Despite these challenges, RH's strong fundamentals and the backing of top holders like Steve Mandel (Trades, Portfolio), Steven Cohen (Trades, Portfolio), and Ron Baron (Trades, Portfolio) suggest that the company is well-positioned for future success.
This article first appeared on GuruFocus.
