What happened

Shares of RH (NYSE:RH) gained 13.1% in value last month, according to data provided by S&P Global Market Intelligence. The stock has nearly doubled this year as investors have quickly adjusted their expectations after the last few quarters have shown accelerating growth.

RH (formerly Restoration Hardware) just reported its fiscal third-quarter results on Dec. 4, which showed continued growth on the top and bottom lines, highlighted by exceptional margin performance.

A luxurious lounge chair in front of a fireplace in a living room.

Image source: RH.

So what

Here are the highlights for the fiscal third quarter:

  • Revenue increased by 6.4% year over year to $677.5 million. Excluding the sales drag from eliminating unproductive product categories and promotions, revenue would have increased by 8.4%.
  • Non-GAAP (adjusted) operating margin improved to 13%, a significant bump over 9.6% in the year-ago quarter.
  • Adjusted earnings per share soared 74% year over year to $2.79, beating Wall Street's estimates of $2.23 for the quarter.

CEO Gary Friedman sees the stellar results as just the beginning: "Our dominant physical presence combined with our integrated multi-channel platform that generates over a billion dollars online will continue to enable the RH brand to disrupt the highly fragmented luxury home furnishings market and take share for years to come."

Now what

Analysts expect RH to report revenue of $2.69 billion for the year, up 7.3% over last year. Earnings are expected to be $10.86, compared to $7.31 in fiscal 2018. But investors might be more enthusiastic about management's expectations for the long term.

Management sees a "clear path" to $5 billion in annual revenue in North America. However, management believes there is a $20 billion opportunity globally. Given that growth potential, it's easy to understand why the stock has doubled in the last seven months. The shares trade at a forward price-to-earnings ratio of 16.5, while analysts expect earnings to grow 25% annually over the next five years.