Trade-Ideas: Restoration Hardware Holdings (RH) Is Today's "Storm The Castle" Stock
Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.Trade-Ideas LLC identified Restoration Hardware Holdings (RH) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Restoration Hardware Holdings as such a stock due to the following factors:
- RH has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $51.4 million.
- RH has traded 2.3 million shares today.
- RH is trading at 3.61 times the normal volume for the stock at this time of day.
- RH crossed above its 200-day simple moving average.
'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.EXCLUSIVE OFFER: Get the inside scoop on opportunities in RH with the Ticky from Trade-Ideas. See the FREE profile for RH NOW at Trade-IdeasMore details on RH: Restoration Hardware Holdings, Inc., together with its subsidiaries, engages in the retail of home furnishings. Currently there are 8 analysts that rate Restoration Hardware Holdings a buy, no analysts rate it a sell, and 3 rate it a hold.The average volume for Restoration Hardware Holdings has been 835,700 shares per day over the past 30 days. Restoration Hardware has a market cap of $2.4 billion and is part of the services sector and retail industry. Shares are down 5.7% year-to-date as of the close of trading on Wednesday.STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.TheStreetRatings.com Analysis:TheStreet Quant Ratings rates Restoration Hardware Holdings as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and increase in net income. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 7.2%. Since the same quarter one year prior, revenues rose by 39.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 360.00% and other important driving factors, this stock has surged by 86.41% over the past year, outperforming the rise in the S&P 500 Index during the same period. Although RH had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
- RESTORATION HARDWARE HLDNGS reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, RESTORATION HARDWARE HLDNGS swung to a loss, reporting -$0.34 versus $0.52 in the prior year. This year, the market expects an improvement in earnings ($1.73 versus -$0.34).
- 37.27% is the gross profit margin for RESTORATION HARDWARE HLDNGS which we consider to be strong. Regardless of RH's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 2.41% trails the industry average.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Specialty Retail industry and the overall market, RESTORATION HARDWARE HLDNGS's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Restoration Hardware Holdings Ratings Report.
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.
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