Gary Friedman, CEO and major holder of RH (RH), recently bought 46,274 shares. The buy increased his stake by 1%, and came to a total cost just under $10 million.
This is the first insider buy at RH in over two years. Otherwise, company executives have largely been sellers of shares following the exercise of stock options. And company directors have been sellers of shares periodically over the past two years.
Overall, RH insiders own 18.6% of shares.
The specialty retailer is down nearly 30% over the past year. Consumer trends indicate a drop in spending on home furnishings.
That’s borne out by the slowdown at RH. Revenues dropped 2% over the past year, and earnings growth turned negative. Shares trade at 60 times earnings, a hefty premium to the market.
However, shares have shown signs of bottoming out. And they could be on track to retrace some of their losses in the months ahead.
Action to take: Investors may like RH shares here for low-double-digit returns in the months ahead. Shares have started to bounce higher over the past few days just after RH hit a 52-week low around $210.
For traders, the September $270 calls, last trading for about $15.30, could see mid-double-digit returns in the coming weeks on a further rally higher in RH shares.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.