Is RH a Good Investment?

OVERVIEW

RH is a company based in the United States. The company designs, manufactures, and sells luxury furniture products in most states, Canada, and the United Kingdom. The company sells both indoor and outdoor luxury furniture products. The company sells these products in its galleries as well as its e-commerce site. The company was founded in 1979.

Why You Should?

  1. RH has seen sky-high demand for its luxury furniture products in part due to the impacts of the COVID-19 pandemic. People are sprucing up their home environments so they can work, exercise, and/or study in one comfortable place for a long period of time. This has benefited the company’s financial results and has also benefited investors in the company.
  2. RH continues to see strong demand for many of its products during the holiday season. People purchase a lot of furniture products during the holiday season to give away as gifts or to renew their homes to host holiday gatherings. This consumer trend has continued this year and will benefit the company’s financial results. This will also benefit investors in the company.
  3. RH is a great reopening play as well. The company does sell luxury furniture products, and the company traditionally does not perform well during recessions. Once people start to have more disposable income, they will continue to invest in their homes and will buy more RH furniture. This will benefit the company and investors.
  4. Due to the reasons mentioned above, the company has seen rising revenues and profits over the past couple of financial years. This has helped the company grow across all of its markets and offer new products and solutions. This has also benefited investors in the company. In the financial year of 2020, the company reported revenues of around 2.65 billion and profits of around 220 million. Both of these metrics are higher than what the company reported in the financial year of 2018 when they had revenues of around 2.51 billion and profits of around 135 million.

Why You Should Not?

  1. RH faces tough competition from many companies in the United States. In addition to competition from small businesses, some of these companies include Amazon Basics, Costco, IKEA, and many others. This tough competition might hurt the company in the future. This might also hurt investors in the company.
  2. The COVID-19 pandemic has hurt some aspects of the company’s business. Office spaces no longer need furniture as everyone works from home. Furthermore, the company has seen some supply chain disruptions and higher costs associated with the pandemic. This has marginally hurt some of the company’s financial results.

MY OPINION

In my opinion, I think that RH is a great long-term investment due to impacts from the COVID-19 pandemic, a strong holiday season, a good reopening position, and rising revenues and profits. However, tough competition and impacts from the COVID-19 pandemic might hurt the company and its investors in the future.

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Aaditya Patel

Aaditya Patel

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Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.