Restoration Hardware (RH) Stock Chart Shows Potential 11% Downside
NEW YORK (TheStreet) -- With a weakening chart and indicator picture, Restoration Hardware (RH) - Get Report may have a hard time on the upside moving forward.
Looking at this first chart of RH, above, we see a stock trapped by an $85 to $105 range for the past 12 months. In July, RH made a price peak with a peak in the On-Balance-Volume (OBV) line. RH retested the price highs in early November but retreated quickly. Prices have quickly dropped below the 50-day and 200-day moving averages, with the OBV line breaking to a new low for the move down. The weak OBV line indicates that selling is heavier on down days, suggesting that investors are anxious to liquidate long positions. Unfortunately, we have yet to see a bullish divergence from the momentum study to suggest a turn around.
In this chart of RH, above, we can see that RH has more than doubled, so we have something to reverse. The OBV line is rolling over on this timeframe. The Moving Average Convergence Divergence Oscillator (MACD) and the momentum study are weak. Last, prices are below the 40-week moving average. RH looks like it is headed lower to $80 for starters.
TheStreet Ratings team rates RESTORATION HARDWARE HLDNGS as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
We rate RESTORATION HARDWARE HLDNGS (RH) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, growth in earnings per share, increase in net income, good cash flow from operations and expanding profit margins. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- RH's revenue growth has slightly outpaced the industry average of 8.6%. Since the same quarter one year prior, revenues rose by 16.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- RESTORATION HARDWARE HLDNGS has improved earnings per share by 7.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, RESTORATION HARDWARE HLDNGS increased its bottom line by earning $2.19 versus $0.42 in the prior year. This year, the market expects an improvement in earnings ($3.13 versus $2.19).
- The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Specialty Retail industry average. The net income increased by 9.8% when compared to the same quarter one year prior, going from $27.25 million to $29.94 million.
- Net operating cash flow has slightly increased to $28.00 million or 1.83% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -11.31%.
- 41.43% is the gross profit margin for RESTORATION HARDWARE HLDNGS which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 5.90% trails the industry average.
- You can view the full analysis from the report here: RH
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.