Morgan Stanley: At Home Group's EPS Could Double In 2 Years

At Home Group Inc HOME could double its earnings per share over the next two years, which makes the retailer among the least expensive stocks relative to its growth, according to Morgan Stanley.

The Analyst

Morgan Stanley's Simeon Gutman upgraded At Home Group rating from Equal-weight to Overweight with a price target lifted from $35 to $47.

The Thesis

At Home's business remains in the early stages of expansion, with 75-percent unit growth remaining, Gutman said in the upgrade note.

New stores are ramping at a quicker-than-expected rate, and it's reasonable to assume this trend will continue given an "unmatched" value proposition, the analyst said. 

At Home's strategy is working,  Gutman said, adding that she has "higher confidence" in the company's ability to notch top-line growth in the high teens, 30-basis-point-plus EBIT margin expansion and 20-percent-plus EPS growth in the medium term. 

The retailer is targeting a 25-percent net income growth rate, which implies doubling its earnings per share in three years, the analyst said.

At Home's recent momentum and faster growth imply the potential for a doubling of earnings in just two years, Gutman said. This also creates the likelihood of beat-and-raise earnings reports, which would help the stock move higher in the medium term, she said. 

Price Action

At Home Group shares were trading higher by more than 6.4  percent at the time of publication at $38.71 and hit a 52-week high of $40.74 during Tuesday's session.

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