RH (RH) AI Stock Analysis

• Market Cap: $3.82B
• Dividend Yield: N/A
• Average Volume (3M): 1.24M
• Price to Earnings (P/E): 38.6
• Beta (1Y): 2.77
• Revenue Growth: 9.56%
• EPS Growth: 205.41%
• Country: US
• Employees: 5,690
• Sector: Consumer Cyclical
• Sector Strength: 84
• Industry: Specialty Retail
• EPS (TTM): 2.93
• Shares Outstanding: 18,745,070
• 10 Day Avg. Volume: 1,062,522
• 30 Day Avg. Volume: 1,244,626
• PEG Ratio: -2.75
• Price to Book (P/B): -47.36
• Price to Sales (P/S): 2.44
• P/FCF Ratio: -36.26
• Enterprise Value/Market Cap: 2.05
• Enterprise Value/Revenue: 2.35
• Enterprise Value/Gross Profit: 5.27
• Enterprise Value/Ebitda: 16.92
• 1Y Price Target: $273.45
• Price Target Upside: 31.78% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 13

• Rating: 49 Neutral
• Price Target: $217.00 ▲(4.58% Upside)

RH's overall stock score is primarily impacted by its challenging financial performance, characterized by high leverage and weak profitability. While the earnings call provided some positive insights into growth and expansion, the valuation remains unattractive, and technical indicators suggest cautious trading. The company's strategic initiatives and international expansion offer potential, but significant risks from tariffs and financial instability weigh heavily on the score.

Positive Factors

Revenue and Demand Growth

The company's ability to grow revenue and demand despite external challenges indicates strong market positioning and effective business strategies, which are vital for long-term growth.

European Expansion Success

Successful international expansion, especially in Europe, enhances RH's global footprint and diversifies revenue streams, supporting sustainable growth and reducing reliance on domestic markets.

Improved Operating Margins

Improved operating margins reflect enhanced operational efficiency and cost management, which bolster profitability and provide a buffer against economic uncertainties.

Negative Factors

High Financial Leverage

High leverage and negative equity indicate potential financial instability, which can limit the company's ability to invest in growth opportunities and weather economic downturns.

Cash Flow Challenges

Declining free cash flow suggests difficulties in generating cash from operations, potentially impacting the company's ability to fund expansions and meet financial obligations.

Tariff Challenges

Ongoing tariff challenges introduce cost pressures and operational uncertainties, which can disrupt strategic plans and affect long-term profitability.

RH Business Overview & Revenue Model

Company Description

RH, together with its subsidiaries, operates as a retailer in the home furnishings. It offers products in various categories, including furniture, lighting, textiles, bathware, decor, outdoor and garden, and child and teen furnishings. The company provides its products through its retail galleries; and Source Books, a series of catalogs, as well as online through rh.com, rhbabyandchild.com, rhteen.com, and rhmodern.com, as well as waterworks.com. As of January 29, 2022, it operated a total of 67 RH Galleries and 38 RH outlet stores in 30 states in the District of Columbia and Canada, as well as 14 Waterworks showrooms throughout the United States and the United Kingdom. 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.

How the Company Makes Money

RH generates revenue primarily through the sale of its luxury home furnishings and décor products across its retail galleries and online platform. The company employs a membership model, offering customers exclusive access to products and services, which encourages higher spending among members. Key revenue streams include direct sales of furniture and accessories, as well as design services offered to clients. RH also benefits from partnerships with interior designers and architects, enhancing its visibility and sales within the luxury market. The company's focus on high-margin products and limited-edition collections contributes to its overall profitability.

RH Financial Statement Overview

Summary

RH maintains strong gross margins but faces significant challenges with declining revenue and high leverage. The negative equity is a major financial risk, and cash flow issues indicate liquidity constraints. Improvement in revenue growth and debt management is crucial for long-term stability.

Income Statement

The company's TTM gross profit margin is strong at 44.5%, indicating effective cost management. However, both EBIT and EBITDA margins have declined over time, with the TTM EBIT margin at 9.9% and EBITDA margin at 14.2%. Net profit margin stands at a modest 2.6%. The revenue growth rate shows a negative trend, indicating a decrease in total revenue compared to previous years, which is concerning.

Balance Sheet

The company's balance sheet reveals significant leverage with a negative stockholders' equity, resulting in an undefined debt-to-equity ratio. The negative equity is a major concern, indicating potential financial instability. Despite this, the company maintains a reasonable total asset base, but the equity ratio is negative due to the negative equity.

Cash Flow

The operating cash flow to net income ratio is 0.6, indicating that operating cash flows are below net income, which could be a liquidity concern. The free cash flow is negative, reflecting high capital expenditures. However, the free cash flow to net income ratio is -2.0, suggesting challenges in converting net income into free cash flow.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	3.34B	3.18B	3.03B	3.59B	3.76B	2.85B
Gross Profit	1.49B	1.41B	1.39B	1.81B	1.86B	1.33B
EBITDA	463.25M	453.28M	523.59M	774.84M	1.07B	612.12M
Net Income	106.83M	72.41M	127.56M	528.64M	688.55M	271.81M
Balance Sheet
Total Assets	4.70B	4.55B	4.14B	5.31B	5.54B	2.90B
Cash, Cash Equivalents and Short-Term Investments	34.56M	30.41M	123.69M	1.51B	2.18B	100.45M
Total Debt	1.25B	3.94B	3.72B	3.63B	3.38B	1.58B
Total Liabilities	4.74B	4.72B	4.44B	4.52B	4.37B	2.45B
Stockholders Equity	-40.90M	-163.59M	-297.39M	784.66M	1.17B	447.03M
Cash Flow
Free Cash Flow	-50.91M	-213.69M	-67.14M	230.04M	476.73M	389.64M
Operating Cash Flow	174.11M	17.09M	202.21M	403.69M	662.11M	500.77M
Investing Cash Flow	-249.79M	-240.41M	-307.43M	-171.07M	-194.35M	-197.60M
Financing Cash Flow	118.72M	130.59M	-1.28B	-902.48M	1.61B	-243.91M

RH Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 207.50
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For RH, the sentiment is Negative. The current price of 207.5 is below the 20-day moving average (MA) of 218.28, below the 50-day MA of 221.40, and below the 200-day MA of 256.13, indicating a bearish trend. The MACD of -5.96 indicates Positive momentum. The RSI at 43.82 is Neutral, neither overbought nor oversold. The STOCH value of 35.11 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for RH.

RH Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
WSM	76 Outperform	$23.89B	21.56	51.75%	1.23%	3.28%	9.29%
ASO	73 Outperform	$3.59B	10.09	18.42%	0.93%	-2.20%	-17.95%
BBWI	63 Neutral	$5.29B	7.63	-52.83%	3.09%	-0.18%	-18.95%
Sector *	61 Neutral	$18.38B	12.79	-2.54%	3.03%	1.52%	-15.83%
ETSY	59 Neutral	$7.17B	57.89	-39.97%	―	2.38%	-38.88%
W	57 Neutral	$11.48B	―	17.86%	―	0.87%	54.67%
RH	49 Neutral	$3.82B	38.59	-38.18%	―	9.56%	205.41%