Valued at $2.6 billion, small-cap Revolve Group Inc. (RVLV) is a retail company focused on the millennial and Gen Z consumer groups. The company attracts young customers by marketing clothing, shoes, and designer products such as activewear, jeans, loungewear, coats, boots, slippers, heels, sneakers, and more from various brands. They also provide skincare and beauty products such as makeup and haircare, along with accessories such as hats, belts, and more.
Based in California, the e-commerce company is a constituent of the benchmark Russell 2000 Index (RUT).
RVLV has been a breakout stock this year, gaining more than 97% YTD and jumping 26.8% in the past month alone. By comparison, the broader RUT is up about 14.5% in 2024.
Revolve Group Beats on Q3 Earnings
Revolve Group reported its third-quarter results after the close last Tuesday, Nov. 5, and beat the market's bottom-line expectations yet again. The online retailer reported a profit of $11 million, which translated to a profit of $0.15 per share - up 9.9% year over year, and easily beating analysts' estimates of $0.09 per share. Revenue during the period came to $283.1 million, roughly 10% higher from the year-ago quarter, and better than the consensus forecast of $270.1 million.
Management's guidance for Q3 gross margin was 52.3% to 52.5%, but the actual result came a bit short, at 51.2%, which Revolve Group attributed to a rise in shipping charges and increased markdowns. However, lower expenditures had a favorable impact on operating expenses.
Total order volume of 2.2 million, active customers of 2.63 million, U.S. net sales of $222.65 million, and net sales for the rest of the world of $60.50 million all came in stronger than Wall Street expected, though average order value of $303 missed the $305.60 estimate.
“We achieved these strong financial results while continuing to invest in initiatives that we believe set us up well for market share gains over the long-term, including international expansion, leveraging AI technology for merchandising and marketing enhancements, expansion into physical retail, and broadening our owned brand capabilities,” said co-founder and co-CEO Michael Mente.
Is RVLV a Good Buy?
RVLV has a consensus “Moderate Buy” rating from the 16 analysts in coverage, but the mean price target of $29.79 is a discount to the stock's current price around $32 per share.
The stock is by no means cheap, at the current valuation of 2.12 times forward sales. However, RVLV is priced at a modest discount to its historical average valuation of 2.49 times sales, suggesting the growth stock is reasonably valued, even as it trades within range of its two-year highs.
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