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.
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.
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.
Junior Analyst, Money Morning
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