Editor's note: This is a brief excerpt from a research note written by retail sector head Brian McGough at 10:28pm ET last night.
This quarter served as another milestone for Restoration Hardware (RH) in its march towards $11.00 in earnings, and additional proof for us that this is perhaps the best idea in all of US retail.
The after-hours move to $80 is nice…we’ll definitely take that. But it’d be a mistake to lose sight of the very real potential for this to be a $200+ stock over a 3-4 year time period. The EPS CAGR RH needed to get there is over 40%, and our research says it will get there. What multiple is fair for a 40% EPS grower that earns $11? Let’s say 20x, conservatively. If we’re right on earnings, we can build to a stock well above $200.
In other words, the call is not done. It’s really just beginning.