What happened

Shares of RH (NYSE:RH) nearly tripled last year as the home furnishings specialist saw its strategic turnaround begin to bear fruit, bouncing back form a terrible 2016. According to data form S&P Global Market Intelligence, the stock finished the year up 181%. 

As the chart below shows, despite a couple of setbacks, the stock was on an upward swing for virtually the whole year.

RH Chart

RH data by YCharts

So what

The company formerly known as Restoration Hardware entered the year near all-time lows as product delays and a sluggish transition to a membership model had torched profits in 2016. However, RH began to gain traction early in 2017 when the company reported strong preliminary fourth-quarter earnings in February, sending the stock up 25%, as revenue and profits were near the high end of the company's previous guidance.

CEO Gary Friedman said the company had completed the most uncertain stage of its transformation with the launch of RH Modern, the transition from a promotional to a membership model, and a reduction in inventory and stock keeping units (SKUs) now behind it. 

A stylish reclining chair in a living room

Image source: RH.

The stock surged again when the company issued its full fourth-quarter earnings report, gaining 15%, as the company beat estimates on top and bottom lines and continued to prime expectations for a comeback. The stock popped again in May after the company issued a $700 million share repurchase authorization, but then plunged when its first-quarter earnings report missed the mark, as guidance for the second quarter was below expectations. Over the next two months, the stock charged higher but then gave back much of those gains. However, shares soared again in September after the company beat earnings estimates and raised its guidance, with Friedman reasserting the company's long-term goal of $4 billion to $5 billion in North American revenue. 

The stock continued rising over the subsequent months and spiked again on in November when the company raised its third-quarter and full-year guidance. Finally, shares dipped to close out the year, though there seemed to be no news pushing it lower.

Now what 

Through the first three quarters of 2017, RH revenue has increased 14%, and revenue growth is slowing down as the company has lapped the worst of its performance in 2016. Adjusted earnings per share has more than doubled to $1.50, but again that growth seems to stem in part from the company's previous errors. While the upscale furniture retailer is posting solid comparable brand growth, it's unclear if 2017's gains owed more to low expectations than strong growth. Analysts see earnings nearly doubling this year again to $5.31 a share. If the company can deliver that number or better, the stock should have more room to run.

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