Luxury home furnishings company RH (NYSE:RH) has enriched many investors over the years. Formerly known as Restoration Hardware, its stock has risen more than 1,500% since its IPO in Nov. 2012. Given the numerous closures and bankruptcies that are currently taking place among brick-and-mortar chains, that kind of return from a retailer is shocking.

A closer look at the business will show that great investment ideas can emerge from written-off industries.

A luxury brand

Most people know RH as a high-end furniture store, but it is striving to be much more than that. As of Aug. 1, the company operated 68 galleries across major markets in the U.S. and Canada. These showrooms cater to the wealthiest segment of the population and are designed to be unlike anything in the retail landscape with entire collections on display as opposed to individual pieces of furniture.

RH is in the process of transforming these galleries into newer, larger, and more modern outfits, some even with restaurants and cafes. These Design Galleries average 33,000 square feet of selling space, and it is all part of the company's plan to build a complete luxury brand.

luxurious living room

Image source: Getty Images.

Management expects operating margin to exceed 20% and return on invested capital (ROIC) to be higher than 50% for fiscal year 2020. In September's second-quarter earnings call, CEO Gary Friedman compared RH to the great European fashion houses with a focus on "continuing to take this brand up the luxury mountain." High margins and ROIC certainly put RH in that category.

Expansion opportunity

In addition to opening five to seven galleries each year in the U.S., RH has its eyes set on the U.K. and Europe. The high-end furniture market is extremely fragmented, and shoppers often must interact with multiple parties to complete a renovation project. RH says it wants to solve this problem by creating the leading interior design firm. The company even sees an opportunity to fix the design and installation process, improving the customer experience.

But it doesn't end with selling furniture. RH is introducing its first Guesthouse -- an upscale, private hotel with its own furniture, artwork, and other accessories -- in New York City. Additionally, the company offers clients a yacht, called RH3, for charter in the Mediterranean and Caribbean. If you're like me, you may be wondering if the company is spreading itself too thin by getting into all these different verticals. But Friedman continues to execute on the massive opportunity he has to construct a "brand with no peer," an opportunity he says can reach $20 billion in yearly revenue (the company generated just over $2.5 billion in the trailing 12-month period).

Current environment

Although the company was forced to temporarily close its locations in March due to the coronavirus pandemic, RH has since benefited from some favorable trends. "The booming real estate activity in second-home markets, an accelerated shift of families moving to larger suburban homes, and the uptick in homebuilding should drive increased spending in our market for an extended period of time as the cycle for purchasing and furnishing a home is anything but quick," the company said in the second-quarter shareholder letter.

It's difficult to say how long this social and economic environment will last, but there is one factor that could potentially hurt the business. RH's clientele is wealthy, so a volatile stock market influenced by the upcoming election is a near-term headwind. However, these customers are less sensitive to fluctuations in the economy, which provides some resiliency.

Buy the stock

With a trailing price-to-earnings ratio of 44, RH stock isn't cheap, but high-quality businesses almost never are. Friedman has a long-term focus and doesn't care about hitting Wall Street's quarterly expectations. There is still much to be proven, but this company has the makings of a multi-bagger stock in your portfolio. Management forecasts adjusted net income growth of 15% to 20% per year over the long term, which should excite potential shareholders.

With a huge growth runway in front of it, the current market capitalization of $7.6 billion could be grow much higher in the next decade if the company establishes the brand and scale that management envisions. It also doesn't hurt that Warren Buffett's Berkshire Hathaway is a large shareholder. If I could buy only one stock, it would be RH.