ARHS - Arhaus: Lots Of Potential But Timing Is Wrong
2024-01-25 19:46:04 ET
Summary
- Arhaus’ revenue has grown at a CAGR of +29%., while EBITDA has exceeded this at +51%. The company is in a rapid growth phase, with good brand development thus far.
- Arhaus operates a simple but effective business model with attractive, high-quality products and strong consumer interest. So long as this remains, the growth runway appears strong.
- The company is facing significant headwinds as macroeconomic conditions wreak havoc on the housing market and thus demand for furniture.
- Arhaus is performing well relative to its peers, with superior upside through better-than-average growth. We expect Arhaus to struggle with maintaining above-average margins, however.
- Arhaus is broadly trading in line with its peers (accounting for margin erosion), which suggests upside at its current valuation based on growth. We believe the timing is poor, however, due to headwinds.
Investment thesis
Our current investment thesis is:...
Arhaus: Lots Of Potential, But Timing Is Wrong