Jurriën timber CHONGQING, CHINA – MARCH 30: In this photo illustration, the logo of RH (formerly known as … More Restoration Hardware), a luxury home furnishings company, is displayed on a smartphone screen with a background showing the company’s recent stock market activity through a candlestick chart, reflecting RH’s financial performance, market volatility, and investor sentiment in the premium retail and interior design sectors, on March 30, 2025, in Chongqing, China. (Photo by Cheng Xin/Getty Images)
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RH (NYSE:RH), a luxury home furnishings company, saw its stock nosedive 40% on Thursday, April 3. RH’s recently released fourth-quarter earnings of $1.58 per share on $812 million in revenue fell short of consensus estimates, which were $1.92 EPS and $830 million in revenue. The company also issued a full-year sales growth outlook of 10% to 13%, below the consensus forecast of 14%. Adding to the negative news, broader markets were significantly impacted by unexpectedly high tariffs announced by the Trump administration. Our take on market crash risk right now has more details on tariffs and its impact on the broader market. RH’s significant exposure to Asia further contributed to the downturn, ultimately leading to a significant drop in RH’s stock price.
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Even after its recent price decline, we believe RH stock remains unattractive and represents a poor buying opportunity at its current price of around $150. This conclusion is based on our analysis, which compares RH’s current valuation to its operating performance over recent years and its current and historical financial condition. Our assessment across key parameters—Growth, Profitability, Financial Stability, and Downturn Resilience—indicates that the company exhibits weak operating performance and financial health, as detailed below. Therefore, even considering its moderate valuation, we find RH stock unattractive. That said, if you seek upside with lower volatility than individual stocks, the Trefis High-Quality portfolio presents an alternative – having outperformed the S&P 500 and generated returns exceeding 91% since its inception.
How Does RH’s Valuation Look vs. The S&P 500?
Going by what you pay per dollar of sales or profit, RH stock is currently below the broader market.
RH has a price-to-sales (P/S) ratio of 0.9 vs. a figure of 3.2 for the S&P 500
Additionally, the company’s price-to-operating income (P/EBIT) ratio is 9.3 compared to 24.3 for S&P 500
And, it has a price-to-earnings (P/E) ratio of 41 vs. the benchmark’s 24.3
How Have RH’s Revenues Grown Over Recent Years?
RH’s Revenues have grown marginally over recent years.
RH has seen its top line shrink at an average rate of 5% over the last 3 years (vs. increase of 6.3% for S&P 500)
Its revenues have grown 5% from $3.03 Bil to $3.18 Bil in the last 12 months (vs. growth of 5.2% for S&P 500)
Also, its quarterly revenues grew 10% to $812 Mil in the most recent quarter from $738 Mil a year ago (vs. 5.0% improvement for S&P 500)
How Profitable Is RH?
RH’s profit margins are much worse than most companies in the Trefis coverage universe.
RH’s Operating Income over the last four quarters was $323 Mil, which represents a moderate Operating Margin of 10.1% (vs. 13.0% for S&P 500)
RH’s Operating Cash Flow (OCF) over this period was $17 Mil, pointing to a very poor OCF-to-Sales Ratio of 0.5% (vs. 15.7% for S&P 500)
Does RH Look Financially Stable?
RH’s balance sheet looks weak.
RH’s Debt figure was $3.9 Bil at the end of the most recent quarter, while its market capitalization is $2.8 Bil (as of 4/3/2025). This implies a poor Debt-to-Equity Ratio of 64.7% (vs. 19.0% for S&P 500). [Note: A lower Debt-to-Equity Ratio is desirable]
Cash (including cash equivalents) makes up $30.4 Mil of the $4.6 Bil in Total Assets for RH. This yields a poor Cash-to-Assets Ratio of 0.5% (vs. 14.8% for S&P 500)
How Resilient Is RH Stock During A Downturn?
RH stock has fared worse than the benchmark S&P 500 index during some of the recent downturns. While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.
Inflation Shock (2022)
RH stock fell 60.6% from a high of $538.32 on 3 January 2022 to $212.26 on 30 June 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
The stock is yet to recover to its pre-Crisis high
The highest the stock has reached since then is $454.52 on 21 January 2025 and currently trades at around $150
Covid Pandemic (2020)
RH stock fell 67.8% from a high of $249.63 on 19 February 2020 to $80.43 on 23 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
The stock fully recovered to its pre-Crisis peak by 3 June 2020
Putting All The Pieces Together: What It Means For RH Stock
In summary, RH’s performance across the parameters detailed above are as follows:
Growth: Neutral
Profitability: Very Weak
Financial Stability: Very Weak
Downturn Resilience: Very Weak
Overall: Very Weak
The stock’s moderate valuation doesn’t adequately reflect RH’s weak performance across key parameters, making it a very unattractive investment and reinforcing our conclusion that it’s a poor buy. The company’s financial and operating performance, as well as its resilience to economic downturns, has been weak, and the current high interest rate environment offers little prospect of near-term improvement.
Adding to these concerns, the Trump administration’s new tariffs on trade partners are likely to increase inflation, potentially delaying interest rate cuts by the U.S. Fed. Persistently high interest rates will likely keep the housing market subdued, further weighing on RH’s performance.
Moreover, RH will bear the brunt of tariffs levied on Asian countries, which will negatively impact its profitability either through margin compression or reduced consumer demand due to price increases. For these reasons, we believe RH remains a bad stock to buy.
Preserve & Grow Wealth with Risk-Focused Quality Portfolios
While you would do well to avoid RH stock for now, you could explore the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid- and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.
RH Return Compared With Trefis Reinforced Portfolio
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