RH (RH -0.33%), the luxury home furnisher formerly known as Restoration Hardware, is a stock that Warren Buffett's Berkshire Hathaway currently owns. While it's always prudent to do your own research before deciding to make a purchase, having the Oracle of Omaha's conglomerate as a fellow shareholder is a good sign when looking for potential investments. 

With a market cap at nearly $10 billion and a stock that has more than doubled over the past 12 months, RH is certainly a company that has benefited from the coronavirus pandemic as consumers turned their attention to in-home spending. 

But the future is what investors care about, so is RH stock a buy?

Recent performance

RH posted a 26.7% adjusted operating margin in the third quarter (which ended Oct. 31), more than double the previous record for the company. This was on revenue that soared 25% from the prior-year period to reach $844 million in the quarter.

living room with luxurious furniture

Image source: Getty Images.

Although the margin was driven higher by strong pricing and RH's decision not to mail out its Fall Sourcebooks, this did not negatively affect demand for the company's products. Total company demand (the value of all orders placed across the company's businesses) was up an impressive 33% in the third quarter despite coronavirus restrictions still affecting RH stores and restaurants.  

And management thinks the growth story is not even close to being finished with revenue expected to increase 10% to 15% annually over the next decade. "We have multiple new growth initiatives in the pipeline, including new collections, new concepts, new galleries, new guesthouses, and new businesses," CEO Gary Friedman said in the most recent shareholder letter. 

A great example of this is RH's announced plan to invest in Aspen, Colorado, where the business will spend $105 million on real estate in the area to build stores, restaurants, residences, and a hotel. It demonstrates how RH is trying to scale its vision of taste and luxury in a way never seen before. 

Building a luxury brand

While Friedman certainly credits the pandemic as a tailwind "that is driving increased demand for all things home," he now acknowledges RH as a true luxury brand and offered an interesting comparison between his company and Hermes, the French luxury goods maker.

According to Friedman, Hermes went from being a $20 billion business (by market cap) a decade ago to now being worth over $100 billion, and he wants investors to use this as a guidepost to imagine where RH can be in 10 years. With the projected revenue growth mentioned above, expanding margins, and a higher valuation multiple, he thinks RH could be a business worth $50 billion to $70 billion in 2030.

This may sound more like marketing than long-term guidance, but it's reassuring for investors looking to own stock in companies with visionary leaders who aim high and aren't afraid to zig when others zag. While many are calling for the death of retail, Friedman is steering RH in the other direction by using physical locations as the driving force to build the brand. 

And it's working. RH's Design Galleries are visually stunning, carefully designed spaces where people want to be seen. As the company becomes the preeminent interior design firm in North America, the brand should only become more elevated.

Only if the price is right

A fast-growing business, a true luxury brand, and Warren Buffett's stamp of approval would lead one to expect the stock is overpriced. But this is not the case at all. RH currently trades at a forward P/E ratio of about 25, making it a buy in my view. 

The company is well on its way to building a new kind of luxury brand as its margin expansion shows. Creating a differentiated image and offering a distinct experience for consumers are competitive advantages, even in an increasingly digital world, and RH's ability to do this in a seemingly boring space like home furnishings is even more impressive. 

If the company performs in the next 10 years even at half the level management is guiding to, the stock should provide exceptional returns for long-term investors.