Stock Groups

Furnishings Company Has Room to Run By TipRanks


© Reuters. RH Stock: Furnishings Company Has Room to Run

RH (NYSE:) stock finds itself stuck in a consolidation channel in the $600 to 700 range.

RH’s large-ticket consumer goods, such as high-end furnishings, are prone to experiencing explosive demand during the first innings of any market cycle. (See RH stock charts on TipRanks)

While some pundits may think a transition to midcycle will bring forth more modest earnings, I still remain bullish on RH because of the firm’s incredible brand power, and excellent stewardship, both of which enhance the company’s ability to take share in the higher-end corner of the home furnishings space.

RH Capable of Taking Share

While few discretionary firms are immune from the effects of a slowing economy, RH does possess some unique levers it can pull to offset any potential industry sluggishness going into 2022.

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RH’s market capital is just under $15 billion. RH is a brand that has a lot of potential for global growth and brand affinity. RH shareholders are in good hands with Gary Friedman as their CEO.

It has the potential to grow beyond its borders in the U.S. or Canada. RH has the potential to generate significant bottom-line growth, possibly for many more years, if it can appeal to international customers.

RH is in its early stages, but it could still be a highly successful growth story. It will not be easy to stop this stock, which is high in momentum. Even though the economy may be cooling, it has too many assets.

Wall Street’s Take

According to TipRanks’ consensus analyst rating, RH stock comes in as a Strong Buy. There are 11 Buys among the 13 ratings. Three Holds remain.

The average RH price target is $793.92. The price target ranges from $700 to $897 for analysts.

Bottom Line

RH stock isn’t cheap at over 39 times trailing earnings and around 4.5 times sales.

The premium price may not be worth it, however, considering the potential growth and talent of the management.

Only a few firms can enjoy long-term high-margin growth.

Disclosure: Joey Frenette does not own shares in any of the companies mentioned at time of publication.

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