RH is scheduled to report earnings after Thursday’ close. The stock hit a record high of $744.56/share in 2021 and is currently trading near $247. The stock is prone to big moves after reporting earnings and can easily gap up if the numbers are strong. Conversely, if the numbers disappoint, the stock can easily gap down. To help you prepare, here is what the Street is expecting:
Earnings Preview
The company is expected to report a gain of $1.53/share on $827.71 million in revenue. Meanwhile, the so-called Whisper number is a gain of $1.45/share. The Whisper number is the Street’s unofficial view on earnings.
A Closer Look At The Fundamentals
The company’s earnings have been up and down over the last few years. In 2020, the company earned $11.66/share. In 2021, earnings jumped to $17.83. Then, in 2022 earnings exploded to $26.12. In 2023, earnings came in at $19.90. This year, earnings are expected to come in at $6.87 and then grow to $7.23 in 2025. In 2026, earnings are expected to grow to $13.05/share.
A Closer Look At The Technicals
Technically, the stock is not acting well. It is in a steep downtrend and is currently trading 30% below its 52-week high. Normally, that is not a big deal but when you look at the major indices trading near their record highs that shows us that RH is exhibiting low relative strength. Furthermore, the stock is trading below its 50 day moving average line (DMA) and below its longer-term 200 day moving average line which are not healthy signs.
Value Corner
Value, like beauty, is in the eye of the beholder. Value investors might argue that the stock is undervalued and has a strong chance to rally from here. The price to earnings ratio is high and above 60. However, the forward price to earnings ratio is lower and currently in the high 20’s. Additionally, RH’s strong brand positioning in the high-end home furnishings market provides a competitive moat, which is crucial for long-term value creation. Recently, the company made a strategic shift towards a membership model which has helped stabilize revenues and improve customer loyalty. RH has been able to generate consistent free cash flow and maintain healthy margins despite economic fluctuations. The recent expansion into hospitality and international markets demonstrates management’s vision for long-term growth. Value investors can make a compelling case that RH is undervalued. They can point to the combination of brand strength, cash flow generation, and growth initiatives as reasons the stock may rally from here. Only time will tell.
Company Profile
RH, together with its subsidiaries, operates as a retailer in the home furnishings market. The company offers products in various categories, including furniture, lighting, textiles, bath ware, décor, outdoor and garden, baby, child, and teen furnishings.
It provides its products through rh.com, rhbabyandchild.com, rhteen.com, rhmodern.com, and waterworks.com online channels, as well as operates RH Galleries, RH outlet stores, RH Guesthouse, and Waterworks showrooms in the United States, Canada, the United Kingdom, and Germany.
The company was formerly known as Restoration Hardware Holdings, Inc. and changed its name to RH in January 2017. RH was incorporated in 2011 and is headquartered in Corte Madera, California.
Pay Attention To How The Stock Reacts To The News
From where I sit, the most important trait I look for during earnings season is how the market and a specific company reacts to the news. Remember, always keep your losses small and never argue with the tape.
Disclosure: The stock has been featured on FindLeadingStocks.com.