RH (RH:NYS) Fundamental Valuation Report


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RH $89.44 (USD) Close Price as of 02/04/2018

Based on the analysis conducted in this report, RH, (RH:NYS) is found to be  Undervalued.

Company RH
Symbol:Exchange RH:NYS
Industry Consumer Cyclical:Specialty Retail
Close Price/Date $89.44 (USD) 02/04/2018
Weighted Average Valuation $104.86 (USD)
Summary RH:NYS is found to be  Undervalued by 17.2% using the 2 valuation models shown below.
Valuation Models Used Analyst Consensus: $119.75 (USD)
(in order of importance) Comparables: $82.52 (USD)
Valuation Methods Analysis This company is:
Cash Flow Basis: Undervalued on a Cash Flow Valuation basis
Comparable Company Basis: Overvalued on a Comparable Valuation basis
Asset Basis: Overvalued on an Asset Valuation basis

Valuation Details

RH Valuations

Summary chart

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for RH:NYS

Using a discounted cash flow model we generated an intrinsic value of $132.43 (USD) for RH:NYS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

RH:NYS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $132.43 1% 5% 1% 5%
WACC (or Ke) 10.03 $160.31 $111.49
Terminal Growth Rate 3.00 $114.19 $156.71
Tax Rate 0.40 $144.79 $120.07
Cash Flow 418,386,000 $124.98 $139.88
Capital Expenditures -2,799,800 $132.38 $132.48
Long Term Debt 716,953,000 $134.09 $130.76

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $82.52 (USD) for RH:NYS. We also generated a valuation of $65.51 (USD) using other metrics and comparables.
The comparable companies were Dick’s Sporting Goods (DKS:NYS), Michaels Companies (MIK:NAS), Murphy (MUSA:NYS), Tractor Supply (TSCO:NAS) and Wayfair (W:NYS)

Company RH:NYS End Date Value
Earnings/Share $0.07 (USD)
Book Value/Share ($0.34) (USD)
Sales/Share $83.42 (USD)
Cash Flow/Share $18.98 (USD)
EBITDA/Share $6.89 (USD)
Price Based on Comps Adjustment Factor (%)
$0.86 (USD) 0.0
$0.00 (USD) -0.2
$58.65 (USD) -7.0
$156.50 (USD) 71.8
$9.29 (USD) -37.7
RH:NYS Ratios Used Average Values DKS:NYS MIK:NAS MUSA:NYS TSCO:NAS W:NYS
1277.71 PE Ratio 12.28 11.10 9.31 10.39 18.30 0.00
0.00 PB Ratio 3.44 1.80 0.00 3.20 5.33 0.00
1.07 PS Ratio 0.70 0.42 0.68 0.20 1.07 1.15
4.71 PCF Ratio 39.01 4.82 6.93 8.98 12.26 162.05
15.21 EV to EBITDA 7.10 4.63 6.86 7.61 9.28 0.00

Multiples

Using a multiples approach we generated a valuation of  $139.80 (USD) for RH:NYS

Company RH:NYS End Date Value
Earnings/Share $0.07 (USD)
Book Value/Share ($0.34) (USD)
Sales/Share $83.42 (USD)
Cash Flow/Share $18.98 (USD)
EBITDA/Share $6.89 (USD)
Price Based on Comps Adjustment Factor
$2.52 (USD) 0
$0.00 (USD) 0
$103.54 (USD) 0
$345.78 (USD) 0
$107.37 (USD) 0
Ratios Ratio Average
PE Ratio 36.03
PB Ratio 2.92
PS Ratio 1.24
PCF Ratio 18.22
EV to EBITDA 15.59

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  RH:NYS for the last 6 years was  2.98

We ran the Adjusted Book Value for  RH:NYS and generated a book value of  ($0.34) (USD)
By multiplying these we get an adjusted valuation of  ($1.01) (USD)

Analyst Data

In the Stockcalc database there are 4 analysts that provide a valuation for RH:NYS. The 4 analysts have a concensus valuation for RH:NYS for 2019 of $119.75 (USD).

RH:NYS RH

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
3 3 0 4.0000 Outperform 2018-4-2

Current Price: not available

Analyst Consensus
USD Millions 2019 2020 2021
Mean EPS 5.81 6.82 8.37
# EPS Analysts 4 3 2
Mean Revenue 2,578.00 2,772.70 3,021.80
# Revenue Analysts 4 3 2
Mean Target Price 119.75
Mean Cash Flow 10.30 10.16 10.69
Mean EBITDA 303.10 362.90 406.20
Mean Net Income 151.60 185.60 224.10
Mean Debt Outstanding -740.20 -614.70 -383.20
Mean Tax Rate 25.00 25.00 24.00
Mean Growth Rate 33.09
Mean Capital Expenditure 73.20 135.80 86.70

Company Overview (RH:NYS USD)

Price 89.44
Range 88.64 – 97.52
52 week 42.54 – 105.78
Open 95.25
Vol / Avg. 1.73M/1.31M
Mkt cap 1.91B
P/E 1277.71
Div/yield 0.00/0.00
EPS 0.07
Shares 21.31M
Beta 0.54
Summary chart

Detailed Company Description

RH, formerly Restoration Hardware Holdings Inc is a luxury brand in the home furnishings marketplace offering furniture, lighting, textiles, outdoor and garden products. It offers collections through its retail galleries, source books and websites.

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.

The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).

The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.

With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.

If we have Analyst coverage for the company we use the consensus target price here.

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