During market hours today, Richelieu Hardware (TSE: RCH) (OTC: RHUHF) reported its Q3-2022 financial results, which beat both revenue and earnings per share (EPS) expectations.
The company’s sales increased by 26.7% year-over-year, reaching C$472.9 million (expectations were C$451.9 million). 15.8% of its sales growth was organic, while the other growth came through acquisitions. U.S. sales made up 41% of sales, as they grew by 43.7%.
Meanwhile, diluted EPS came in at C$0.82, beating the C$0.69 consensus estimate (18.8% year-over-year growth compared to net income growth of 19.6%). In addition, EBITDA reached C$79.2 million, representing a growth rate of 23.8% and an EBITDA margin of 16.7%.
Next, adjusted cash flow from operations, which doesn’t include net changes in non-cash working capital balances, increased by 23.5%, reaching C$1.08 per share or C$60.9 million. On an unadjusted basis, cash from operations came in at -C$58.2 million due to increasing inventory levels.
For the nine months ended August 31, 2022, sales grew 29.1%, and diluted EPS grew 27.3%. Return on equity, on average, was a respectable 24.1%.
Worth noting, the company has a working capital ratio of 2.8:1, meaning it has more current assets than current liabilities. Also, it only has C$5.4 million in debt. However, it has a negative cash balance of -C$85.9 million.
Is Richelieu Hardware a Good Stock to Buy?
According to analysts, Richelieu Hardware stock earns a Moderate Buy consensus rating based on just two Buy ratings assigned in the past three months. The average RCH stock price prediction of C$49.75 implies 28.8% upside potential.
Conclusion: Richelieu Sees Solid Growth in Revenue and Profitability
Overall, RCH’s financial results look good, as the company experienced high growth in both revenue and earnings. However, earnings grew less than revenue, implying that profit margins dropped, and adjusted cash flow was negative due to rising inventory levels. These are things to watch, going forward. Another thing to monitor is the company’s cash balance, which should ideally be positive.
