It’s been an exceptional week, but what is driving the Best & Less action?
The post Why the Best & Less (ASX:BST) share price has surged 19% in a week appeared first on The Motley Fool Australia. –
The Best & Less Group Holdings Ltd (ASX: BST) share price has had a cracking past week on the market.
In the space of 5 trading days, shares in the clothing retailer have marched 18.9% ahead. This continues the successful trend that Best & Less has experienced since its ASX-listing in July. The company’s share price has surged more than 38% in its 51 days of publicly listed life.
Right now, the Best & Less share price is swapping hands for $3.32 apiece, up 2.47%.
Let’s inspect the company and gain an understanding of what has propelled its shares higher recently.
Is no news good news?
Despite the Best & Less share price ascending to new all-time highs, the last week has entailed not much at all. This could be a positive for investors. It appears the business is focusing on the task at hand and executing accordingly.
The period of uneventfulness has ensued following the company’s release of its full-year results for FY21. Impressively, Best & Less exceeded its prospectus forecasts on all key metrics. This included increasing revenue by 6.1% to $663.2 million year-over-year.
Perhaps, even more, astonishing, the company’s net profit after tax skyrocketed 191.9% to $47 million. This milestone accomplishment surpassed its prospectus forecast by ~18%. This demonstrated that Best & Less is a formidable ASX-listed retailer that is able to turn a hefty profit.
It is possible that more investors are now paying attention and take a closer look at the retailer. If so, it could be warranted considering the fundamentals on display.
For example, at its current market capitalisation of $406.2 million, Best & Less is trading on a price-to-earnings (P/E) ratio of 8.6 times. In comparison, ASX-listed company’s that Best & Less considers competitors are fetching much richer earnings multiples, as shown below:
Baby Bunting Group Ltd (ASX: BBN) with a $675 million market capitalisation trades on a 40 times 12-month trailing P/E ratio
Reject Shop Ltd (ASX: TRS) with a $233 million market capitalisation trades on a 28.4 times 12-month trailing P/E ratio
H & M Hennes & Mauritz AB (STO: HM-B) with a $40.5 billion market capitalisation trades on a 48.2 times 12-month trailing P/E ratio
It would seem that the broader market is pricing in low to no growth in the near term for Best & Less by comparison. Although, the company has already committed to 4 net new stores in FY22 to date.
Best & Less share price unfazed by lockdown impact
It also appears investors are willing to look beyond the immediate COVID-19 impacts on retail shares. In July, the Australian Bureau of Statistics reported a 2.7% month-on-month fall in retail sales.
Today, National Australia Bank Ltd. (ASX: NAB) has shared its forecast for retail sales in August. Unfortunately, it’s not looking pretty. In its note, NAB stated it expects an additional 2.7% month-on-month reduction in retail sales for August due to lockdowns.
These difficult conditions were also reflected in an FY22 trading update released by Best & Less today. According to the release, for the first 8 weeks of the new financial year, total sales were down 25.7%. Similarly, like-for-like sales were down 11.7% compared to FY21.
Despite this, the Best & Less share price is climbing higher today.
Should you invest $1,000 in Best & Less right now?
Before you consider Best & Less, you’ll want to hear this.
Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Best & Less wasn’t one of them.
The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.
*Returns as of August 16th 2021
Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Baby Bunting. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.