Why Kathmandu Holdings Rose 5% Today

Kathmandu Holdings Ltd [ASX:KMD] opened up 5.1% today, to $1.97 per share.

What happened to Kathmandu?

This morning KMD was one of the many companies included in the Macquarie 2017 conference presentation. But not only were they pumped up by Macquarie, they also shared a trading update with investors.

Total group sales for the third quarter were up 11.9% year-on-year (YOY). Same-store sales for the same period rose 11.5% YOY.

KMD stated that their strong sales results were assisted by new product performance and improved promotional execution.

What now for Kathmandu?

At a price-to-earnings (P/E) ratio of 8.83-times, KMD does look cheap. And their strong sales growth does warrant further investigation. According to Reuters, KMD’s industry average P/E is around 34-times.

Analysts are expecting KMD to generate an earnings per share (EPS) of 18 cents in FY17, 20 cents in FY18 and 21 cents in FY19.

Using a P/E of 20-times, an EPS of 21 cents would mean KMD could climb to $4.2 by FY19. However, I’d suggest you not use these basic assumptions and calculations by themselves. An investment in KDM still requires an inspection of their balance sheet and statement of cash flow.

Also, there is the possibility that KMD might not achieve their EPS targets or climb to a P/E of 20-times. So, rather than going off the word of analysts, do the dirty work yourself and learn more about the company before you invest.


Härje Ronngard,

Junior Analyst, Money Morning

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