Stephen Takacsy - BNN - TOP PICK RICHELIEU HARDWARE (RCH TSX)
A high-quality company now on sale.
Richelieu is a leading North American distributor and manufacturer of specialty hardware for kitchens, bathroom cabinets and storage closets. It has grown organically and by acquisition. Recently it reported record sales of $1.8 billion as well as record profits. It usually trades at a premium valuation but sold-off hard in 2022, down 25 per cent because investors view it as a housing stock.
Richelieu’s sales are mostly tied to the home renovation market through manufacturers and contractors (rather than DIY through the home hardware channel) who are still backlogged from the pandemic demand and supply chain issues. So, despite a slowdown in housing prices, there is still huge pent-up demand in the home renovation market. The company is extremely well managed, has a very strong balance sheet and now has a compelling valuation with a P/E of around 16X 2023 and the company has been aggressively buying back shares at these levels.