Investors Sell JB Hi-Fi Down on 42.3% Revenue Jump

This morning, JB Hi-Fi Ltd [ASX:JBH] fell 4.4%, to $25.03 per share.

Why did the JB Hi-Fi Share Price drop?

The retailer released full-year results for FY17 this morning. JBH generated $5.63 billion in revenue, up 42.3% on FY16 figures. Profit for the year was up 13.3% to $172.4 million.

A 42.3% jump in revenues is huge for a retailer worth $2.9 billion. But, as you might remember, JBH acquired the Good Guys in September last year, giving total revenues a boost.

JBH also improved their cash flow position, increased dividends and, thanks to intangibles, more than doubled total equity (net assets).

JBH also took increased long-term borrowings from $109.7 million to $558.8 million for the period.

What’s next for JBH?

JBH’s underlying profit of $207.7 million beat forecasts of $206.8 million. It also exceeded their FY17 guidance range of $200–206 million.

But is JBH worth buying at its current price?

It depends if JBH can continue its growth pattern.

Over the past five years, JBH has grown revenues and profits by an average of 13.3% and 10.5% respectively. It’s very likely that the company will continue to grow into the future.

But by how much?

Revenues jumped by 42% in FY17. It’s unlikely they will do the same in FY18.

Assuming that earnings per share (EPS) increase by 5% year-over-year for the next five years, it’s doable.

That would mean, by 2022, JBH may have an EPS of $1.97.

Right now, investors are paying 16-times earnings for the stock. If they pay a similar multiple for the retailer in five years’ time, you could be looking at a potential return of 26%.

If you want to find potentially far higher growth stocks in the market, check out these three small-caps.

Regards,

Härje Ronngard,

Junior Analyst, Money Morning


Money Morning is Australia’s most outspoken financial news service. Your Money Morning editorial team are not afraid to tell it like it is. From calling out politicians to taking on the housing industry, our aim is to cut through the hype and BS to help you make sense of the stories that make a difference to your wealth. Whether you agree with us or not, you’ll find our common-sense, thought provoking arguments well worth a read.

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