Should You Buy Premier Investments Ltd at This Price?

Premier Investments Ltd [ASX:PMV] is a specialty fashion retailer. While you might not be familiar with the name, they own brands like Peter Alexander, Dotti, Portmans, Just Jeans and Smiggle, among others.

This morning, PMV jumped up 7.02%, to a high of $14.78 a share.

What happened to the Premier Investments share price?

Yesterday, PMV released their half-yearly results for FY17. Total revenues were up 7.1%, to $588.6 million. Star-performer Smiggle reported sales growth of 26.4%; it continues to show strong growth in all countries it operates in.

Underlying net profit before tax climbed 9.7%, to $100.6 million. Solomon Lew, Premier’s Chairman, said:

The Premier team, led by Premier Retail CEO Mark McInnes, has again delivered a very stock performance with solid growth in sales and underlying earnings. These results were achieved in a half that saw several Australian discretionary retailers go out of business whilst others have reported significant decline in earnings.

Premiers performance in the half shows the robust nature of our business resulting from key investment decisions made over the past five years in line with the business’ 2011 strategic review.

What now for PMV shares?

Buying Premier right now means you believe two things will likely happen.

First, that their fastest growing businesses — Smiggle and Peter Alexander — will continue to grow.

In the first half, Smiggle contributed $134.7 million to revenues, with almost 60% generated overseas. PMV added 33 new Smiggle stores during the half, bringing the total number of Smiggle stores to 272.

Sales from Peter Alexander rose 13.8%, contributing $99.4 million to total revenues. PMV opened three new Peter Alexander stores during the half, while at the same time upgrading existing stores.

The second reason you might invest in the company is that you believe PMV will further increase their online presence and sales.

PMV’s online sales did outperform industry growth for the half. Total sales were up 48% on first-half FY16 figures. By 2020, PMV expects to achieve $100 million in sales from their online platform. But they’ll have to invest in their online channel to make this a reality.

Yet, if Smiggle, Peter Alexander and online sales can continue to grow at their current levels or higher, PMV could be worth considering as an investment.

Regards,

Härje Ronngard,

Junior Analyst, Money Morning

PS: It’s not always easy to find growth among billion-dollar stocks. Unless they can significantly increase earnings, you’d be lucky to get double-digit returns. That’s why some investors prefer the smaller end of the market.

Small-cap stocks are a riskier investment. There is no running away from it. But they can potentially grow earnings 10-fold in a short space of time.

Small-cap specialist Sam Volkering has been on the other end of small-caps running up 1,000% or more.

So far in 2017, Sam hasn’t recommended a losing stock yet. In his advisory service, Australian Small-Cap Investigator, his top three active investments are up 304.57%, 466.04% and 1,624.49%.

To find out more, click here.


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