At Home Group's Stock Has 43% Upside, Analyst Says

Home decor retailer At Home Group Inc HOME saw a muted initial response to its 2016 initial public offering but has since gained nearly 100 percent. One Wall Street analyst projects more gains ahead.

The Analyst

The Buckingham Research Group's Kelly Crago initiated coverage of At Home Group's stock with a Buy rating and $43 price target.

The Thesis

At Home is considered  one of the most attractive growth stories within the entire retail space, Crago said in a Friday note.

The company should be able to grow its footprint at a high-teens rate for at least several years, which will drive earnings per share growth of 25 percent or more, the analyst said. At Home is led by a strong management team that boasts the necessary experience to build a modern-day home goods retail business through value propositions, a broad store offering and differentiation from competitors, she said. 

At Home also stands to benefit over time as it grows its brand image, Crago said. The company is investing behind brand-building initiatives that should increase its brand awareness from the current 11 percent, she said. Investments behind its brand will serve as "powerful drivers of comp growth," which suggests the company can deliver upside to its comp growth guidance of a low-single-digit rate, Crago said. 

At Home's 25-percent-plus store-level EBITDA margins and a new store payback period of less than two years gives "clear visibility" into a positive free cash flow profile in the coming years, according to Buckingham. The stock is trading at a "very favorable" multiple of just 21x on fiscal 2020 EPS of $1.43.

Price Action

Shares of At Home Group were trading up 5.88 percent at $31.89 Friday morning. 

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