RH Common Stock (RH)

FairStock Score: 48/100 — MIXED

Key Financials

Strengths

• Generates $302 million in annual free cash flow (11.8% yield on market cap)

Concerns

• Trades significantly above Graham Number ($21) with negative 539% margin of safety—limited downside protection
• High leverage at 65.50x debt-to-equity increases financial risk and interest expense burden
• Altman Z-Score of 0.5 places it in the financial distress zone—elevated bankruptcy risk

AI Analysis

RH Common Stock is a small-cap consumer cyclical company valued at $2.6 billion. The business generates $3.4 billion in annual revenue with a 0.8% net margin and $302 million in free cash flow. From a quality standpoint, RH shows distressed Altman Z-Score of 0.5 warrants caution and highly leveraged at 65.50x D/E. On valuation, the stock is reasonably priced at 19.6x earnings, with trades far above its Graham Number ($21) with no margin of safety. Growth dynamics show revenue growing at 3.7% and profit growth of 106.8%. Our composite FairStock Score of 48/100 reflects mixed fundamentals overall. Investors should weigh the business quality against the current price and their own margin of safety requirements.

Bull Case

Improving fundamentals and sector tailwinds could drive meaningful earnings growth, compressing the effective multiple for patient investors. With $302 million in annual free cash flow (11.8% yield), management has ample capital for buybacks, dividends, or accretive acquisitions.

Bear Case

Elevated leverage at 65.5x D/E means rising interest rates or revenue weakness could strain debt covenants and force asset sales at distressed prices. Regulatory changes, input cost inflation, or demand normalization represent underappreciated risks that could materially impact forward estimates.

Data from SEC filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer