Arhaus has followed the market’s trajectory closely, rising in tandem with the S&P 500 over the past six months. The stock has climbed by 6.1% to $10.30 per share while the index has gained 8.2%.
Is now the time to buy Arhaus, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is Arhaus Not Exciting?
We're swiping left on Arhaus for now. Here are three reasons we avoid ARHS and a stock we'd rather own.
1. Shrinking Same-Store Sales Indicate Waning Demand
Same-store sales is a key performance indicator used to measure organic growth at brick-and-mortar shops for at least a year.
Arhaus’s demand has been shrinking over the last two years as its same-store sales have averaged 3.2% annual declines.
2. Fewer Distribution Channels Limit its Ceiling
With $1.36 billion in revenue over the past 12 months, Arhaus is a small retailer, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with suppliers.
3. EPS Trending Down
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Sadly for Arhaus, its EPS declined by 13.8% annually over the last three years while its revenue grew by 7%. This tells us the company became less profitable on a per-share basis as it expanded.
Final Judgment
Arhaus isn’t a terrible business, but it doesn’t pass our quality test. That said, the stock currently trades at 21.9× forward P/E (or $10.30 per share). This multiple tells us a lot of good news is priced in - you can find more timely opportunities elsewhere. Let us point you toward a fast-growing restaurant franchise with an A+ ranch dressing sauce.
Stocks We Like More Than Arhaus
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