Is it too late to buy Premier Investments (ASX:PMV) shares?

The Premier Investments Limited (ASX:PMV) share price was on fire on Wednesday. Is it too late to buy the retail giant’s shares?
The post Is it too late to buy Premier Investments (ASX:PMV) shares? appeared first on The Motley Fool Australia. –

Smiggle Investor presentation 2019

The Premier Investments Limited (ASX: PMV) share price was on fire on Wednesday following the release of a trading update.

The retail conglomerate’s shares ended the day 13% higher at $25.35.

At one stage, the Premier Investments share price was up almost 19% to a record high of $26.70.

How is Premier Investments performing?

Premier Investments’ update revealed that its Retail business has been performing exceptionally well during the first half of FY 2021.

As a result, the company is expecting this side of the business to deliver earnings before interest and tax (EBIT) of $221 million to $233 million for the 27 weeks ending 30 January.

This will be up between 75% and 85% on the EBIT of $126.1 million it achieved during the 26 weeks ended 25 January 2020.

Management advised that this has been driven by strong like for like sales, a significant lift in higher margin online sales, and cost savings largely from rental reductions.

Is it too late invest?

One broker that believes it is too late to invest is Goldman Sachs.

According to a note out of the broker this morning, its analysts have retained their sell rating but lifted their price target slightly to $20.80. This price target implies potential downside of 18% from yesterday’s close price.

The broker doesn’t appear to believe that this strong form will last beyond FY 2021 and is forecasting a decline in earnings in FY 2022.

The broker is forecasting earnings per share of $1.40 in FY 2021 but then just $1.03 in FY 2022 and $1.09 in FY 2023. In light of this, it feels its shares are expensive compared to peers.

Goldman explained: “While the higher margin online sales is likely to be an ongoing structural benefit for PMV, the unique conditions driving the strong sales environment are, in our view, going to be difficult to sustain beyond FY21 as will be the reductions to operating costs. We estimate that GM expansion, operating leverage and the cost mitigating factors have all been material to this profit outcome.”

“PMV looks reasonably priced on FY21E P/E of 18x compared to its 5-year average of 19.9x. However, on a sustainable profit basis, PMV continues to screen expensive vs. its peers, currently trading at 24.7x on a reported P/E basis and 22.1x when adjusted for the market value of its ownership of Breville Group (BRG: ASX) and Myer (MYR: ASX),” it concluded.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

See The 5 Stocks

*Returns as of June 30th

More reading

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Is it too late to buy Premier Investments (ASX:PMV) shares? appeared first on The Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!