Restoration Hardware Holdings Inc (RH), Lumber Liquidators Holdings Inc (LL): Which Stock Is Best in the Home Improvement Space?

A Look at Next Year

Looking ahead, both companies have given detailed guidance and are expecting solid growth. Take a look at full-year guidance and how it compares to last year

Clearly, you can see that Restoration is growing revenue and comparable sales considerably faster, despite being the larger company. However, if Restoration Hardware is the more expensive of the two then it could explain why it has fallen while Lumber Liquidators has risen as of late.

Here are price/sales and P/E ratios based on guidance for both company’s current market capitalization. Keep in mind, faster growing companies almost always trade with larger premiums to fundamentals.

Here Are the Facts!

It doesn’t matter how we spin it, the bottom line is that Restoration Hardware and Lumber Liquidators trade with a near identical market cap, yet Restoration Hardware is growing revenue and comps faster and is cheaper relative to sales with more expansion opportunities.

In my opinion, based on the facts, Restoration Hardware is the clear winner. Restoration trumps Lumber Liquidators in all relative metrics and has significant room to improve its operating margins. Therefore, while I believe that Lumber Liquidators is deserving of its valuation, Restoration Hardware is particularly undervalued, and is worth your due diligence.

The article Which Stock Is Best in the Home Improvement Space? originally appeared on Fool.com and is written by Brian Nichols.

Brian Nichols owns RH. The Motley Fool recommends Lumber Liquidators. The Motley Fool owns shares of Lumber Liquidators. Brian is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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