This score-card analysis attributes an Overall Score to a company by analyzing several aspects that I consider to be among the most important.
In summary, a company to have an overall score close to 100% must have the following characteristics:
- Report high growth rates in the last 3 years (and in the last quarter) in terms of Revenue, Gross Profit, Operating Income and Net Income. Furthermore, it must operate with high and improving margins in recent years.
- Analysts expect Earnings Per Share (EPS) and revenues to grow in the short term (in the next quarter) and in the medium to long term (in the next 5 years). Moreover, they expect the company to be undervalued at current prices and in the last quarter their EPS expectations must have been beaten with a consequent rise in share prices.
- The stock price of the company must have outperformed the S&P 500 index and in the last 3 months the Hedge Funds and Insiders bought shares in the company.
The overall score ranges from 0% (if the characteristics listed above are all very negative) to +100% and it is unlikely that there will be a company with a +100% score because the requirements for achieving this score are very high, however a score higher than +70% can be considered good.
This analysis alone is not enough to decide whether or not to invest in a company because it does not provide indications on the timing of entry, but it is a good starting point.
Restoration Hardware (RH)
- Overall Score: 70,4%
- Positive sides:
- Warren Buffett’s Berkshire Hathaway stake in RH is worth $206.3 million as of Sept. 30
- Clear outperformance over the S&P 500 index in the last 6 months (+ 72.87%)
- Net Income improved by 73.4% in the last 3 years, Net Margin improved by 40% compared to 3 years ago
- Quarterly Revenue + 10.3%, Quarterly Operating Income + 29.7% (+ 17.6% Operating Margin)
- Analysts expect an annual EPS growth rate of 25% for the next 5 years (+ 48% in the next quarter)
- RH in the last quarter reported better EPS than analysts’ expectations and the stock price reacted by + 5.1%
- Negative sides:
- Quarterly Net Margin slightly decreased (-8%)
- In the last quarter Hedge Funds decreased their positions by 63.7k of shares and the Insiders sold shares for a total of $6.29M
RH (formerly Restoration Hardware) is an upscale American home-furnishings company headquartered in Corte Madera, California. The company sells its merchandise through its retail stores, catalog, and online.
The overall score of RH is 70% .
In the last 6 months, RH has overperformed the S&P500 index by 72,9% and analysts believe the company is undervalued by 1,6% .
In the last quarter, the company reported revenue of 706,5 million, up by 10,3% compared to the same quarter 12 months earlier. Revenue TTM (Trailing-12-Months) are equal to 2612,4 million, up by 23,9% in the last 3 years.
RH reported an operating income of 104,9 million in the last quarter, an improvement of 29,7% compared to the same quarter 12 months earlier, also reporting an improvement of 17,6% in the operating margin. Considering the sum of the last four quarters (TTM), RH reports an operating income of 291,7 Million , a growth of 57,2% compared to three years ago and an improvement of 26,9% in the operating margin.
RH reported a net income of 63,8 million in the last quarter, an improvement of 1,4% compared to the same quarter 12 months earlier, also reporting an improvement of -8,0% in the net margin. The TTM net income is 158 million , a growth of 73,4% compared to three years ago and the net margin has improved by 40,0% .
In the next quarter, analysts expect growth in EPS (Earnings Per Share) of 48,0% and a growth in revenue of 7,0% . Furthermore, they expect an annual growth of RH EPS by 25,0% for the next 5 years.
In the last quarter, RH reported better EPS than analysts’ expectations and the stock price reacted by increasing by 5,1% .
Finally, in the last 3 months the Hedge Funds have decreased their positions by 63.7k shares. The Insiders have sold shares worth $6.29M .
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This analysis considers numerical data to understand whether a company is good or not based on business growth and whether analysts are positive about it.
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Sources & additional info
*The comparison with the S&P 500 index is visible inside the graph.
*Data updated to the last quarterly report available
*Data in Millions of Dollars
*Data from zacks.com, tipranks.com, reuters.com, finance.yahoo.com
*Company information from wikipedia.com
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DISCLAIMER: The information in this blog post represents my own analysis/opinions and does not contain a recommendation for any particular security or investment.