Arhaus trades at $7.80 and has moved in lockstep with the market. Its shares have returned 14% over the last six months while the S&P 500 has gained 16.4%.
Is now the time to buy Arhaus, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Is Arhaus Not Exciting?
We’re sitting this one out for now. Here are three reasons why ARHS doesn’t excite us, plus one stock we’d rather own.
1. Flat Same-Store Sales Indicate Weak Demand
Same-store sales is a key performance indicator used to measure organic growth at brick-and-mortar shops for at least a year.
Arhaus’s demand within its existing locations has barely increased over the last two years as its same-store sales were flat.
2. Fewer Distribution Channels Limit Its Ceiling
With $1.41 billion in revenue over the past 12 months, Arhaus is a small retailer, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with suppliers.
3. EPS Trending Down
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Sadly for Arhaus, its EPS declined by 24.2% annually over the last three years while its revenue grew by 2.9%. This tells us the company became less profitable on a per-share basis as it expanded.
Final Judgment
Arhaus’s business quality ultimately falls short of our standards. That said, the stock currently trades at 14.9× forward P/E (or $7.80 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We’re fairly confident there are better stocks to buy right now. We’d recommend looking at one of our all-time favorite software stocks.
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