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RH Stock Surges 463% in a Year: Surpasses Industry Mark
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Despite the pandemic, RH (RH - Free Report) stock has done exceedingly well and emerged as an attractive investment option. This is quite evident from the stock’s performance in the past year. In the same time frame, the company’s shares have surged 463.3% compared with the industry’s rally of 252%. The company is benefiting from robust RH Core demand and gross margin expansion.
Recently, the company reported better-than-expected fourth-quarter fiscal 2020 results (ended Jan 30, 2021) on the back of strong demand and solid margins. It witnessed 36% increase in core demand for the fiscal fourth quarter. For February and the first two weeks of March, the same was up 73% and 96%, respectively, year over year. the company’s total demand was up 29% in the quarter.
Moreover, an upward revision in earnings estimates for fiscal 2021 reflects analysts’ optimism regarding the company’s growth potential. In the past 7 days, the Zacks Consensus Estimate for its fiscal 2021 earnings has moved up 9.1% to $21.36 per share. Let’s delve deeper and find out why the company’s uptrend is likely to continue in the near future.
Solid Fundamentals
The company’s focus on improving profit margins as well as creating a new and differentiating shopping experience with the addition of hospitality (restaurants and cafes) in new galleries continues to drive growth. Focus on elevating the brand and architecting an integrated operating platform have aided RH in becoming one of the few retailers with expanding margins and rising operating earnings, while driving higher returns on invested capital.
Over the past five years, RH has been busy in architecting a new operating platform that includes transitioning from a promotional to membership model, distribution center network redesign, the redesign of reverse logistics and outlet business, along with reconceptualization of home delivery and customer experience. These initiatives have helped the company lower costs and inventory levels, while boosting earnings and inventory turns.
Margin Expansion
The company continues to impress investors with margin expansion strategy. In fourth-quarter fiscal 2020, adjusted gross margin increased expanded 480 basis points (bps) to 47.4% owing to investments to elevate the RH brand. Moreover, the metric skyrocketed 540 bps in fiscal 2020. Given the solid results in fiscal 2020, RH expects revenue growth in the range of 15-20% with adjusted operating margin expanding 100-200 bps and ROIC in excess of 60% for fiscal 2021.
Upbeat 2021 View
Solid housing market momentum, a record stock market, low interest rates, the expectation of a rebound in the economy and jobs market, combined with the recent further acceleration in RH demand trends are expected to contribute to the results. RH expects first-quarter fiscal 2021 revenues to grow at least 50% and adjusted operating margin to rise around 20%.
Shares of Haverty Furniture have surged 67.6% in the past six months.
Tempur Sealy International and Williams-Sonoma have an impressive long-term earnings growth rate of 18% and 8.4%, respectively.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
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RH Stock Surges 463% in a Year: Surpasses Industry Mark
Despite the pandemic, RH (RH - Free Report) stock has done exceedingly well and emerged as an attractive investment option. This is quite evident from the stock’s performance in the past year. In the same time frame, the company’s shares have surged 463.3% compared with the industry’s rally of 252%. The company is benefiting from robust RH Core demand and gross margin expansion.
Recently, the company reported better-than-expected fourth-quarter fiscal 2020 results (ended Jan 30, 2021) on the back of strong demand and solid margins. It witnessed 36% increase in core demand for the fiscal fourth quarter. For February and the first two weeks of March, the same was up 73% and 96%, respectively, year over year. the company’s total demand was up 29% in the quarter.
Moreover, an upward revision in earnings estimates for fiscal 2021 reflects analysts’ optimism regarding the company’s growth potential. In the past 7 days, the Zacks Consensus Estimate for its fiscal 2021 earnings has moved up 9.1% to $21.36 per share. Let’s delve deeper and find out why the company’s uptrend is likely to continue in the near future.
Solid Fundamentals
The company’s focus on improving profit margins as well as creating a new and differentiating shopping experience with the addition of hospitality (restaurants and cafes) in new galleries continues to drive growth. Focus on elevating the brand and architecting an integrated operating platform have aided RH in becoming one of the few retailers with expanding margins and rising operating earnings, while driving higher returns on invested capital.
Over the past five years, RH has been busy in architecting a new operating platform that includes transitioning from a promotional to membership model, distribution center network redesign, the redesign of reverse logistics and outlet business, along with reconceptualization of home delivery and customer experience. These initiatives have helped the company lower costs and inventory levels, while boosting earnings and inventory turns.
Margin Expansion
The company continues to impress investors with margin expansion strategy. In fourth-quarter fiscal 2020, adjusted gross margin increased expanded 480 basis points (bps) to 47.4% owing to investments to elevate the RH brand. Moreover, the metric skyrocketed 540 bps in fiscal 2020. Given the solid results in fiscal 2020, RH expects revenue growth in the range of 15-20% with adjusted operating margin expanding 100-200 bps and ROIC in excess of 60% for fiscal 2021.
Upbeat 2021 View
Solid housing market momentum, a record stock market, low interest rates, the expectation of a rebound in the economy and jobs market, combined with the recent further acceleration in RH demand trends are expected to contribute to the results. RH expects first-quarter fiscal 2021 revenues to grow at least 50% and adjusted operating margin to rise around 20%.
Zacks Rank & Other Key Picks
RH sports a Zacks Rank #1 (Strong Buy). Some other top-ranked stocks, which warrant a look in the same space include Haverty Furniture Companies, Inc. (HVT - Free Report) , Tempur Sealy International, Inc. (TPX - Free Report) and Williams-Sonoma, Inc. (WSM - Free Report) . All these stocks have a same rank as RH. You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Haverty Furniture have surged 67.6% in the past six months.
Tempur Sealy International and Williams-Sonoma have an impressive long-term earnings growth rate of 18% and 8.4%, respectively.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
See these 7 breakthrough stocks now>>