Restoration Hardware Holdings Inc (RH): A Stock to Fly for Many Years to Come!

I have been saying it for months – buy Restoration Hardware Holdings Inc (NYSE:RH)!

I first said to buy at $40 but kicked my outlook to a whole new level once the stock reached $50 after strong earnings. Now, after yet another great quarter – and a stock that’s trading over $65 – let’s see if there is still value in the stock.

A Look At The Quarter

For its first quarter, Restoration Hardware Holdings Inc (NYSE:RH) posted revenue of $301.3 million (beat by $2.17 million) and an Earnings Per Share (EPS) of $0.06 (beat by $0.03). The company’s revenue and comparable store-sales growth was 38% and 41%, respectively, year-over-year.

Such year-over-year comparable sales growth is unprecedented, as Restoration Hardware continues to explode with growth while not expanding its total number of stores. The company is currently assessing 20 different markets for expansion – considering its growth – this expansion should provide the next leg of explosive growth in the years ahead.

In addition to beating expectations, Restoration Hardware also raised its full-year guidance and guides ahead of Second Quarter (Q2) EPS estimates. The company also announced two new businesses, RH Kitchen and Tableware and RH Antiques.

Side-By-Side

It’s one thing to present the fundamentals of a company, but regardless of growth, fundamentals don’t tell you whether or not a company is presenting value. Therefore, let’s take a look at Restoration Hardware Holdings Inc (NYSE:RH) compared to other home improvement stores to see if the stock is still cheap.

	Restoration Hardware	Ethan Allen Interiors Inc. (NYSE:ETH)	The Home Depot, Inc. (NYSE:HD)	Lowe’s Companies, Inc. (NYSE:LOW)
Market Cap (millions)	$2,630	$927	$111,800	$44,540
Trailing P/E	N/A	29.45	24.27	23.7
Forward P/E	31.0	19.78	17.95	16.37
Price/Sales	1.9	1.26	1.47	0.88
Operating Margin	1.93%	7.95%	10.89%	7.29
Revenue Growth*	38%	(4.4%)	7.4%	(0.5%)
Comps Growth*	41%	0.5%	4.3%	(0.7%)

*most recent quarter

Let’s look at key takeaways: Restoration has not produced a profit over the last 12 months, has the lowest margins, is more expensive on a sales/valuation basis, but is growing the fastest. While many people may choose to dwell on the lack of profitability, I see upside and room to improve.

What’s most compelling to me is Restoration Hardware Holdings Inc (NYSE:RH)’s operating margin and its price/sales ratio compared to its competitors. First, Restoration Hardware is without question the fastest growing of the four companies. Above, you can see the growth from most recent quarters, but what you can’t see is full-year guidance.