Restoration Hardware Holdings (RH) Is Today's Perilous Reversal 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 "perilous reversal" (up big yesterday but down big today) 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 $52.6 million.
  • RH has traded 453,905 shares today.
  • RH is down 3.1% today.
  • RH was up 6.8% yesterday.

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More details on RH:

Restoration Hardware Holdings, Inc., together with its subsidiaries, is engaged in the retail of home furnishings. Its product categories include furniture, lighting, textiles, bathware, decor, outdoor and garden, tableware, and children's furnishings. RH has a PE ratio of 50.2. Currently there are 11 analysts that rate Restoration Hardware Holdings a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Restoration Hardware Holdings has been 1.0 million shares per day over the past 30 days. Restoration Hardware has a market cap of $3.2 billion and is part of the services sector and retail industry. Shares are up 30% year-to-date as of the close of trading on Thursday.

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 buy. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, compelling growth in net income, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 1.1%. Since the same quarter one year prior, revenues rose by 13.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • RESTORATION HARDWARE HLDNGS reported significant earnings per share improvement 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 year. We feel that this trend should continue. During the past fiscal year, RESTORATION HARDWARE HLDNGS turned its bottom line around by earning $0.42 versus -$0.34 in the prior year. This year, the market expects an improvement in earnings ($2.33 versus $0.42).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Specialty Retail industry. The net income increased by 252.8% when compared to the same quarter one year prior, rising from -$17.84 million to $27.25 million.
  • 40.63% 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 6.28% trails the industry average.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.

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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