From Thomson Reuters I/B/E/S Estimates:
Forward Earnings: 3.05
Forward PE: 30.3
Earnings Growth Rate (EGR): ~26%
PEG Ratio: 1.16S&P Forward PE: 17.39
S&P EGR: 7.43%
Common Sense Take:
RH has reduced in share price since it neared 100 after its earnings release on 3/26/15. Good thing I trimmed some in the Common Cents portfolio immediately after the spike. Goldman Sachs upgraded the position shortly after the earnings release. Other than that, no relevant news has come out. Therefore, Common Cents maintains a BUY opinion on this position and establishes a price target of $115, assuming a PEG ratio of 1.5 is reasonable given the intact long-term story and the much higher growth rate of RH relative to the S&P (taken from Yahoo Finance).
My price target math is as follows: 1.5 (Assumed PEG) * 26% (EGR) = 39 (Assumed PE); 39 * 3.05 (Forward Earnings) = 118.95. Arbitrarily trim a little of the top, and we're at $115. I include a factor of safety for this position due to its high forward PE - expectations are high for RH's performance.
Going forward, I hope to pick up some RH when it nears $90 and sell that when it nears $100.
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