Temple & Webster (ASX:TPW) is delivering enormous growth right now. Does the share price represent the best value compared to other e-commerce shares?
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The Temple & Webster Group Ltd (ASX: TPW) share price is acting like a rollercoaster right now. Is it the best value e-commerce ASX share to buy currently?
What’s going on in the e-commerce sector?
On top of that, there are some physical retail ASX retail shares that have managed to dramatically increase their online sales like Adairs Ltd (ASX: ADH), JB Hi-Fi Limited (ASX: JBH) and Accent Group Ltd (ASX: AX1).
Each business is in a different segment of the market, and each of them have their own positives and weaknesses.
Over the last year, the share prices of retailers that have managed to tap into the e-commerce boom have soared. Just look at the share price of Adairs – it has risen by 540% over the last year, soundly outperforming the recovery of the broad ASX share market.
What has the Temple & Webster share price done recently?
It has been a crazy 12 months for Temple & Webster shares. Over the last week the share price has fallen 10%, over the last two weeks it’s up 14.5%, over the last two months it’s down 27% and over the last year it’s up 448%. How about that for volatility?
The business has certainly grown its operations significantly over the last 12 months, partly due to the impacts of COVID-19 on the business.
In the FY21 half-year result, the company revealed that revenue had gone up 118% year on year to $161.6 million, earnings before interest, tax, depreciation and amortisation (EBITDA) grew 556% to $14.8 million and it generated $12.2 million of net profit after tax.
Active customers grew 102% to 678,000, the trade and commercial division increased 89% year on year and it was cashflow positive during the half.
The growth has continued into the 2021 calendar year, with year on year growth of 118% to 23 February 2021.
Temple & Webster is doing a number of initiatives to ensure it continues growing strongly.
It’s accelerating its investment into ‘digital’ and advertising to outgrow the market, it’s using price and promotions to attract first time customers, it’s investing in its technology, data, private label and delivery, and it’s focused on growing its business to business sales and operational teams.
It wants to become the largest retailer of furniture and homewares in Australia.
How does the valuation stack up?
According to Commsec, the Temple & Webster share price is valued at 35x FY23’s estimated earnings. Let’s compare that forecast to others in the retail space.
Another business in the homewares space, Adairs, is valued at 11x FY23’s estimated earnings.
E-commerce business Kogan.com, which sells a wide variety of items, is valued at 18x FY23’s estimated earnings.
Temple & Webster may not be the cheapest e-commerce ASX share on earnings multiple terms, but it is certainly delivering a high rate of revenue and profit growth.
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Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Temple & Webster Group Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends ADAIRS FPO. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd. The Motley Fool Australia has recommended Accent Group, ADAIRS FPO, and Temple & Webster Group Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.