Temple & Webster Add $3.18 Million to Market Cap in One Morning

Temple & Webster Group [ASX:TPW] climbed up 22.2% this morning to 16.5 cents per share.

The climb added $3.18 million to TPW’s market cap. Not bad for a company dubbed the worst float of 2016.

What Happened?

This morning, Temple & Webster announced that FY17 revenues would be up approximately 4% and earnings would improve by 50%. CEO Mark Coulter told investors:

Q4 FY17 will be our strongest quarter in our turnaround journey. We have reduced our Q4 EBITDA [earnings before interest, tax, depreciation and amortisation] loss to ~$0.5m, a significant improvement from a loss of $3.1m in the prior year corresponding period.

Coulter now expects the company to become profitable by calendar year 2018, achieving profitability when revenues hit $70-90 million.

What Now?

Be wary of unprofitable companies. Unless they have assets to back up their market valuation, you could be paying for predictions rather than actual earnings.

Having said that, Temple & Webster is not doing anything different from other successful online retailers. As more shoppers shift from in-store to online, you’d expect Temple & Webster to capture more of the market.

But like I said, be wary. Basing an investment off assumptions isn’t a remedy for a good night’s sleep. Instead, I’d suggest you dig a little deeper into the company’s strategy plans going forward, and jump in when profitability emerges.


Härje Ronngard,

Junior Analyst, Money Morning

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